Egyptians wonder how long Sadat can keep wages up, prices down

Early May is when temperatures rise in Egypt, and the government raises wages and cuts prices to keep tempers cool. As he does most years, when President Sadat gave his annual economic speech on May Day, he announced such crowd-pleasing measures as a boost in salaries and a substantial increase in subsidies for essential goods.

The basic wage would rise from $29 to $36 a month. University graduates would make $64 a month instead of $47. Egypt's mammoth subsidies bill would rise from $2.1 billion to $2.8 billion. President Sadat also pledged to see that prices remain fixed.

But the harsh reality is that salaries in Egypt remain woefully meager, and economists expect the relief to be only temporary.

Inflation in Egypt is continuing at a rate of 30-35 percent a year, fueled by a banking system that prints money to finance the deficit. The 1980-81 deficit is $3.9 billion and growing.

The Ministry of Supply and Internal Trade seems unable to keep pace with the growing demand for subsidized goods, especially food. It is estimated that the ministry's import bill rose 50 percent in 1980 over 1979. Egypt now imports more than 35 percent of its food. With a million new mouths to feed every 10 months, the import bill climbs higher and higher, and still fails to meet demand.

Egypt has offset some of its rising costs with an improved tax collection system and its spectacular oil revenues, now amounting to $2.9 billion in foreign exchange a year.

But Egypt has been using its oil earnings to sponsor every conceivable project, from its nuclear energy program to food imports.

"They do their budget here like i do my housekeeping," remarked a Cairo resident wryly. "I have a L100 [Egyptian], and I spend L50 here and L50 there and L50 in another place and suddenly I realize I'm in debt."

It remains to be seens whether Mr. Sadat can fix prices. In the past a rise in salaries has been followed by price hikes, but now the Ministry of Supply and Internal Trade will monitor price changes.

One Egyptian economist is skeptical. "While fixing prices by decree is possible, it requires a certain parallel rationing system, it must be temporary, and everyone must cooperate. Since all those ingredients are lacking, we must assume it will not work."

What Mr. Sadat's decrees have done is to show them the government is doing its best.

But many people wonder i f Mr. Sadat is only putting off the day the piper demands to be paid.

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