(Al-Borsa Daily)
The government plans to reduce the budget deficit by relying on grants from “friends”, according to Ahmed Galal, interim minister of finance.
“Our target for fiscal deficit for the end of this year is 9% of GDP,” Galal said during a press conference on August 20, after stating how he found the 14% budget deficit worrying.
“We understand we are an interim government; we are not here to stay but we are not here to watch things happening,” he said.
Galal said the objectives of the economic team in the current cabinet are to activate the economy, impose financial discipline and achieve social justice.
“Our goals are to deal with immediate challenges and prepare the ground for the new government,” he added.
Galal said to be an expansionary government without having a budget deficit and achieving social justice will require relying on grants from “friends”.
The minister expressed gratitude for Gulf countries which pledged aid.
On the potential economic impact of the United States or European Union cutting aid, Galal said: “We are maybe, maybe, we don’t know that, losing some money from someplace but we are getting some money or even more money from another place.”
The minister provided updates on the International Monetary Fund loan conditions saying that he was not sure whether the government will target it or not “the IMF is not excluded but it’s not the one that will make it or break it for us,” he said.
Galal predicted the economy would recover when security is restored and a political resolution is emplaced, by attracting domestic and foreign investment.
“There is a saving -investment gap and we need our friends outside to come and invest,” he said
“The economic team in this cabinet is committed to improving the business environment as much as possible, but I do believe that it will take security and building political institutions,” Galal added.
Gala said the idea of financially discipline will not be based on increasing taxes “at this particular point in time.”
“When you have an economy that is sluggish, you don’t want to push it into recession,” he added.
However, he indicated that the ministry intends to “rationalise unjustified expenditure” such as energy subsidies and will continue with the smart card project, which will “hopefully” be activated 1 September.
“They are achieving neither the developmental objective nor the growth objective nor the justice objective,” Galal said describing energy subsidies.
The minister forecast that after implementing the first phase of the smart card project, the government will save some EGP 3.5bn.
Galal stressed that subsidies on commodities such as wheat and oil, which roughly represent 20% of energy subsidies, will not be lifted as they fall under the category of social protection, which is another governmental objective.
The minister announced that the government will initiate the conditional cash transfer (CCT) programme this financial year.
“This is an idea of targeting the very poor, identifying them, characterising them but not creating dependency,” Galal said
Thirty characteristics will be used to identify the very poor who are targeted by the CCT initiative.
Discussing social justice, the finance minister said he aspired to create job opportunities particularly for first time job seekers, who represent the majority of unemployed.
Galal continued sating that a long term goal for this government is to “gradually increase the percentage of public expenditure on the health service over time.”
Daily News Egypt asked Galal about the latest developments in the 306306 support Egypt bank account.
“I take this one to be an expression of support more than this is going to be the way to close our financing gap,” he said.
Galal added that he believed this account is of enormous importance because it indicates that Egyptians are passionate about the county and he invited Egyptians to contribute.
