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New budget presented to Shura Council

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Further taxes are expected

The economic committee at the Shura Council continued deliberating the sukuk bill as it discussed the technical aspects of the project law. (File Photo) (AFP Photo)

Egypt’s government presented on Tuesday the new draft state budget for the 2013-2014 fiscal year before the Shura council.
(AFP Photo)

Egypt’s government presented on Tuesday the new draft state budget for the 2013-2014 fiscal year before the Shura council.

The draft budget totals EGP 820bn including four target allocations, said Minister of Finance Al-Morsi Hegazy, speaking before members of the Shura Council.

The new budget aims to raise GDP to 3.8% from the current 2.5%.

“The main objective in the new draft budget was to focus on restoring the financial balance of the national economy,” said Hegazy.

He continued: “This will be done through a clear programme which will be flexible enough to reduce the rates of both the deficit and the national debt compared to GDP by 4.4% or 4.5% over the medium term.”

Hegazy said that the new budget also seeks “to confront any future pressures or crises” in the economy.

“The Ministry of Finance is moving towards gradual financial reform through expansion of the tax umbrella, energy restructuring, and by achieving social justice,” he said.

This will take place on various fronts, first by reforming energy subsidies, “especially electricity”, through the new smart cards system.

The new draft budget also includes sales tax reform and imposing extra taxes.

It also seeks to reform the wages system and health insurance, as well as expanding Public Private Partnership (PPP) programmes.

The general budget includes EGP 692.4bn in expenditures, EGP 13.2bn in financial asset acquisitions and EGP114.5bn in payments on local and foreign loans.

He continued: “Overall budget revenues reached EGP 497.1bn, the proceeds from the acquisition of financial assets hit EGP 11.2bn and borrowing via bonds reached EGP 311.7bn.”

The expected overall deficit is EGP 197.5bn, representing 9.5% GDP, compared to 12 % in the current fiscal year 2012-2013.

“We hope that the deficit will reach 5.5% from GDP by 2016-2017,” said Hegazy.

The size of domestic debt is expected to be 75% of GDP, compared to 90% in the current fiscal year, he said.

Expenditures represent 84.4% of the draft budget. Revenues will cover 71.8% of expenditures, with the monetary budget deficit reaching EGP 195.3bn, or 9.4% of GDP.

Expenditures comprised workers fees and compensations which reached EGP 172.2bn; government sales of products and services, at EGP 30.7bn; interest on local and foreign loans EGP 182bn; EGP 205.5bn in subsidies and social benefits; EGP 38.3bn in other expenditures; and EGP 63.7bn in investments.

Hegazy announced that revenues reached EGP 497.1bn in the new draft budget including tax revenues of EGP 356.9bn, with an increase of EGP 90bn compared to the current fiscal year 2012-2013.

Revenues also include EGP 2.4bn in grants with a decrease of EGP 6.6bn compared to the current budget.

“Total GDP in the new draft budget reached EGP 2.1tn,” said Hegazy. “While in the current budget it was EGP 1.7tn.”

He pointed out that there were further actions taken to increase revenue including expanding the tax umbrella and reforming the tax system as a whole.

“Some 25% of the construction taxes revenues will spend on localities and another 25 % for the fund of slums development,” he said.

The programme for the new budget aims at encouraging the hiring of temporary workers, and reforming minimum and maximum wages limit.

The budget also seeks to increase farmers’ subsidies for health insurance and increase social guarantee pensions to raise the average to EGP 300 per month.

“This strategy follows President Mohamed Morsi’s programme announced during the presidential elections,” said Minister of Planning and International Cooperation Ashraf El-Araby.

El-Araby said, however, that there was “an obvious decline in investment rates and economic growth”.

“Growth has declined to 2%,” he said. “However, the programme aims to raise this rate 7% by 2022.”

“The expenditures balance is in greater danger,” said El-Araby. “The deficit in the expenditures balance reached $32bn, which attributed to low investments rates.”

“The program can only take place through discipline on the Egyptian street,” said El-Araby, “as well as activation of the national economic reform programme, and paying back construction companies and petroleum companies’ dues.”

The Shura Council committees will discuss the budget independently, followed by the general committee, in order to begin voting. This process is expected to finish by the end of June 2013.

Fifteen movements, political parties and human rights organisations have criticised, on Saturday, the government’s presenting the draft state budget before the Shura Council, since they claim it violates Article 55 of the Constitution, which stipulates that the budget must be first presented to the yet-to-be-elected House of Representatives before sending it to the Shura Council.

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Hend El-Behary

Hend El-Behary

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