Egypt struggles with bloated public sector

The government’s plan is to reduce the number of its workers by 38% within ten years.
Sunday 18/11/2018
Tough challenge. Egypt’s Planning Minister Hala al-Saeed. (Egypt’s Ministry of Planning)
Tough challenge. Egypt’s Planning Minister Hala al-Saeed. (Egypt’s Ministry of Planning)

Cairo - The Egyptian government plans to reduce the number of workers in the bloated public sector as part of structural reforms requested by the International Monetary Fund (IMF).

The reforms, the government said, are necessary to speed up work at its offices, which would reflect positively on Egypt’s ability to attract foreign investments and create jobs.

“The fact is that we do not need all these civil servants,” Egyptian Minister of Planning and Administrative Reform Hala al-Saeed said. “The presence of too many workers in the civil service sector impedes, not accelerates, work.”

The government was the largest employer in Egypt for decades. Most university and high school graduates were assured employment in government offices, swelling the public sector. Approximately 5.6 million Egyptians work for the government sector, a ratio of 1 civil servant to every 17.8 citizens.

The size of the public sector is very costly for Egypt, which specified $13.4 billion to civil service salaries in the overall $56 billion 2017-18 budget.

Together with foreign debt services, expenditure on the public sector leaves little money for health, education and development plans.

In November 2016, Egypt signed an agreement with the IMF for a $12 billion loan over three years. The loan provisions require the government to initiate radical structural reforms in the public sector to reduce spending and to make offices more efficient.

Egyptian President Abdel Fattah al-Sisi complained many times about the heavy burden of the civil servants’ salaries. In May, Sisi said work done by the 5.6 million civil servants could be performed by fewer than 20% of that number of workers. He suggested the government cancel an expected pay rise for the government workers and channel the money for the construction of 250,000 classrooms to reduce the pupil/classroom ratio.

The government’s plan is to reduce the number of its workers by 38% within ten years. Saeed said this would be achieved with hundreds of thousands of public sector workers reaching the retirement age of 60 and a freeze on public sector hiring.

The government’s plan to reduce the size of the public sector coincides with national efforts to mechanise essential services provided the public, including the issuance of official documents, driving licences and the distribution of subsidised commodities.

There is a massive support to reduce the size of the public sector in parliament. The plan, lawmakers said, was very important for Egypt to cut spending, address its financial problems and put the government sector on track.

“The government has no other options,” said Amr al-Gohari, the deputy head of the Economic Committee in the House of Deputies. “We spend too much on the public sector without a real economic return.”

The plan to reduce the number of public workers, however, could be dangerous, economists said. If the government stops hiring workers, unemployment — and poverty — could rise, they said.

In the second quarter of the current fiscal year, the unemployment rate was 9.9% and almost 27.8% of the population were listed as poor in 2015, the most recent poverty data available.

Saeed said the government would encourage the private sector to increase its investments. “We will also work hard to attract more foreign direct investments,” she added.

Total dependence on the private sector in job creation would be far from enough to solve Egypt’s unemployment problem, economists said. The country needs to create approximately 800,000 jobs every year.

“Reducing the number of government workers cannot be a good solution,” said Mukhtar al-Sharif, an economics professor at Mansoura University. “The private sector will never be able to employ this huge number of people every year.”