The Egyptian Government announced on 15 January unofficial figures for the 2001-02 fiscal budget that show a total expenditure of E£123bn ($31.9bn), representing a E£10.4bn ($2.7bn) increase from the previous year. Around 45% of the budget for the next fiscal year, or E£54bn ($14.02bn), is allocated to public-sector workers’ salaries and improvements in public services, with E£20.6bn ($5.35bn) going to education, E£8.2bn ($2.13bn) to health care services and E£15bn ($3.9bn) to infrastructure. The proposed budget, which will be submitted to parliament in April, aims to increase work opportunities for 150,000 new university graduates in the government sectors.

Although there are concerns about running a steep fiscal deficit, Egyptian Prime Minister 'Atif 'Ubaid has already stated that the government will not address the existing budget deficit, accumulated over the past three years, by reducing wages or limiting ministerial expenditure. “Reducing rates of expenditure would have a negative effect on education and health services, building roads, security, seaports and airports, water and all other service activities,” the prime minister said. “The only way to deal with the budget deficit in the coming periods is to increase sovereignty resources from oil, the Suez Canal, remittances from Egyptian abroad, customs and taxes.”

Such comments, however, have raised concerns about Dr 'Ubaid’s commitment to difficult economic reform. “Some people think that he is a politician, doing what needs to be done in a slow and cautions way, but he is not giving the right signals,” one Cairo-based economist said. “He is definitely pushing the social agenda, which makes me question the economic agenda. He is pushing for welfare, employment, and treating employment like a human right for every Egyptian. They said they are going to rely on real sources to finance these projects, but who knows where the money is going to come from to fund them. It will come from oil, tourism, maybe tax revenue and the Suez Canal.” But based on the earnings from these external revenue sources, the government will have to find additional financing for its social agenda.

The government’s unwillingness to reduce government expenditure has increased fears that the government’s fiscal policy shows less discipline than in the past. “Standard and Poor’s has said that the currency depreciation had no effect on its negative outlook for Egypt, though greater fiscal discipline would,” Nashwa Salih, a banking analyst with HC Securities, told MEES. “The budget deficit for 2000 was 4.2% of gross domestic product. Based on tentative figures, this figure may be higher for 2001.” Meanwhile, the state budget’s deficit rose to E£14.3bn ($3.7bn) in the first three months of the current fiscal year 2000-01, according to the latest report by the Central Bank of Egypt (CBE). Expenditures amounted to E£27bn ($7.0bn) against only E£13bn (3.37bn) in revenues. The CBE also reported a E£3.3bn ($857mn) increase in interest on local and foreign loans to E£6.4bn ($1.66bn), compared with E£3.1bn ($805mn) for the corresponding period of the previous year. The report showed the government’s reliance on banks to cover the budget deficit had doubled to E£14.3bn ($3.71bn) – an increase of E£7.9bn ($2.05bn) over the corresponding period of last year.

© Copyright MEES 2004.