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Freezing special funds is not the solution: Expert

With many Egyptians dependent on 'special funds' gathered by state institutions, the intent to freeze them until they can be regulated by law could be disastrous, according to Egypt's former minister of finance

Ahram Online, Thursday 5 Apr 2012
Samir Radwan
Former Egyptian finance minister Samir Radwan (Photo: AP)
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The intention of the Egyptian Ministry of Finance to freeze billions of Egyptian pounds locked in "special funds" is not the proper way to resolve the issue, experts told Ahram Online.

The ministry is mulling freezing LE44.2 billion of "private" funds until the government sets specific rules on how they should be used.

"Special funds" are monies raised by state institutions through means other than customs or taxes, such as hospital fees or parking tickets.

"You just need to have proper regulations to govern these funds," Samir Radwan, Egypt's former minister of finance, told Ahram Online. "The [finance] ministry must oversee these funds to avoid waste," he added.

Private funds fell into the line of criticism following the 25 January 2011 uprising. Last Thursday, MP Ashraf Baderddin, head of the Freedom and Justice Party's economy committee, condemned the government's apparent disregard for the squandering of monies from "private funds." He claimed that some officials get millions from these funds.

Other than the claimed squandering, hundreds of thousands of Egyptians depends on these funds as a source of income. "Some of these funds are used to support pensioners; you cannot just freeze private funds and leave people waiting," Radwan explained.

No details about the freeze and what will it include are available. Ahram Online contacted Hany Kadry, second in charge inside the Ministry of Finance, but he refused to give more details on the subject.

A source inside the ministry, requesting anonymity, attested that private funds are often used to finance activities other than the intended purposes of the funds. The source, however, indicated that integrating the funds inside the state budget would defeat the original purpose of the funds.

"These funds were originally created to grant municipalities a certain degree of autonomy, so they wouldn't add pressure to the central budget," the source indicated.

Egypt's parliament has called for including all private funds in the state budget, bringing them under parliamentary supervision.

In February, Finance Minister Momtaz El-Saeed said that the government was preparing a draft law aimed at incorporating private funds into the state treasury in two phases. The monies will be entirely subsumed into Egypt’s state budget by the 2013/14 fiscal year, he said.

Fayza Abul-Naga, minister of planning and international cooperation, told Al-Ahram Arabic news Thursday that the government has not borrowed any money from private funds to cover its current deficit.

Abul-Naga added that the government will form a committee to determine ways to spend the private funds.

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