Egypt’s 2022-2023 budget will go into effect on Friday, having been drafted at a time of challenges that have engulfed Egypt and the rest of the world. They include the repercussions of the Covid-19 pandemic, an unprecedented wave of inflation and the Russian-Ukrainian war, all events that caused ripples and disruptions across the world.
This is how the government sought to present the new budget in its opening speech, explaining that it had been drafted after consultation with hundreds of organisations. He said he made his priorities social protection and living conditions, the health and education sectors, budgetary stability and support for economic activities with particular emphasis on industry and exports.
The government has also sought ways to manage world events that negatively affect the national economy. These include studies on the potential impact of various global challenges on the national economy, with a view to helping achieve financial sustainability, implementing measures that support the most vulnerable groups and ensure transparency.
In the new budget, the state aims to attract foreign financial aid of around LE 146 billion (around $8 billion), up from LE 78.4 billion expected by the end of the 2021-22 budget, this which translates to an 87 percent increase.
It intends to issue international bonds worth about LE 92 billion (about $5 billion) and to borrow about LE 55 billion (about $3 billion) from financial institutions. organizations other than the International Monetary Fund (IMF).
Egypt’s external debt jumped to $145.5 billion in the second quarter of the 2021-22 financial year, from $137.4 billion recorded in the first quarter. According to the Central Bank of Egypt (CBE), the debt “remains within manageable limits”.
But the growth of foreign debt in a short time is a cause for concern, international economics researcher Youssef Salam told Al-Ahram Weekly. He worries about the consequences of hard currency debt, especially in light of recent increases in global interest rates.
Spending in the new budget is estimated at LE 2 trillion, up from LE 1.84 trillion in 2021-22. The government aims to reduce the budget deficit to 6.1% of GDP from 6.2% for the current fiscal year, while GDP growth is targeted at 5.5%.
Hani Al-Husseini, vice-president of the leftist Tagammu party, says the new budget is too optimistic because it treats the current situation, which is responding to an international crisis, as if it were a “passing problem “.
Al-Husseini said the Egyptian economy had been heavily affected, like the rest of the world’s economies, not only by Covid-19 and the Russian invasion of Ukraine, but also by the US central bank, with the Federal Reserve increasing. interest rates, prompting foreign investors to withdraw their money and flee emerging markets.
Without the intervention of the Gulf States to support Egypt with investments and deposits of around $22 billion, the situation would have been more difficult, he said.
In the new budget, the government set oil prices at $80 a barrel, down from $60 this year, and wheat prices at $330 a ton, down from $255 a ton in 2021-22.
Meanwhile, the average interest rate is calculated at 14.5%, compared to 13.7% in 2021-2022. Each interest rate hike costs the budget around LE 30 billion, Finance Minister Mohamed Maait said this week.
On the revenue side, the government expects tax revenue to increase by 23.5% to LE 1,168 billion. It intends to collect this amount by integrating the informal sector into the formal economy to broaden the tax base and develop the use of technological solutions.
Amr Al-Mounayer, former assistant to the finance minister for tax policies, said it could be difficult to meet the targeted revenues, especially since the targeted revenues for 2021-22 – which were lower – do not have not been achieved. Taxes are based on business profits, and with the current economic crisis, businesses are not doing well, he added.
The government has increased allocations for social welfare benefits and subsidies to LE 356 billion from LE 301 billion last year. Public sector salaries were increased by LE 43 billion to LE 400 billion, increasing the income of 4.5 million public sector employees. Some LE 90 billion has been allocated for subsidized food and bread to ensure their availability to 71 million citizens.
In addition, the new budget allocates LE 22 billion to increase the number of beneficiaries of social protection programs and the Takaful and Karama social security schemes to four million families.
Supporting lower income brackets amid current international events was very important, Hassan Ouda, a public finance professor at Germany’s Cairo University, told the weekly.
However, he lamented that the budget was drafted on a regular basis and called for performance-based budgeting to enable monitoring of programs and performance and on the basis of which departments and organizations would receive their share of expenditures.
Ouda said some figures in the budget may need to be changed in the coming financial year to cope with expected changes in global conditions, and for this reason, LE 130 billion has been allocated as a reserve.
A version of this article appeared in the June 30, 2022 edition of Al-Ahram Weekly.