MPs and Finance Minister Mohamed Maait clashed this week over a new legislative amendment aiming to boost the state’s financial revenues While MPs said the amendment comes at the wrong time, Maait insisted that the draft law was necessary to help contain the disastrous impact of the coronavirus on the Egyptian economy.
The draft, an amendment to Law 147/1984 on the imposition of “a state financial resources development fee”, was approved on Monday. The law will levy a “fee” on a wide range of items and activities, including diesel, pet food, tobacco, and mobiles.
While MPs warned that such dues, especially on gasoline and diesel fuel, will lead to an increase in prices and so harm the poor, Maait told parliament’s Budget and Planning Committee on Sunday morning that the draft comes out of necessity and aims to contain the disastrous impact of the international economic crisis caused by the spread of the coronavirus.
“Please understand that a finance minister is not a magician and he does not have a magic wand to procure financial resources,” Maait said, adding that “we as a government have a lot of duties such as providing subsidised goods and spending on services, and in this respect we seek to generate new financial resources as long as these will not be a new burden for ordinary citizens.”
Maait argued that additional financial resources are also important to cut the budget deficit, contain debts and avoid any rise in cost or inflation rates.
Some MPs, including Talaat Khalil, the committee’s deputy chairman, criticised the legislative amendment, arguing that “it shows that the government lacks political sense because the amendment comes at a time when all citizens are suffering from the bad impact of the coronavirus.”
Khalil said imposing fees on diesel will be particularly biting because it will raise transport prices for the poor. “This fee comes at the wrong time and should be rejected,” Khalil said.
Joining forces, Mustafa Salem, the Budget Committee’s deputy chairman, said “we can never accept that a fee be imposed on gasoline and diesel fuel. Remember that the Ministry of Petroleum’s committee in charge of pricing fuel products lowered gas and diesel prices last month,” Salem said, adding that “the committee believes that no fees should be imposed on gasoline and diesel products and in return the pricing committee should not reduce the cost of these products in the future.”
Parliament Speaker Ali Abdel-Aal, however, sided with Maait during the final discussion in a plenary session on Monday. “The government is in desperate need of cash to be able to meet its financial obligations and this is the time to help it,” Abdel-Aal said.
Maait said “the government has a strong political sense and we understand politics very well.
“We are people with a high sense of responsibility and we have been studying this amendment since 2018 and so we are trying our best to contain the negative impact of the current international economic crisis,” Maait said, revealing that the new fees on gasoline and diesel products alone will generate LE6 billion in state revenues, LE15 billion in total.
“This new measure is important to secure the country’s economic future, and make sure that we have adequate financial resources to meet our obligations such as paying the salaries of state employees,” Maait said.
Maait indicated that the new fees do not mean that the selling price of gasoline and diesel fuel to consumers will increase. “The fees are just accounting settlements between the finance and petroleum ministries,” said Maait, adding that “a committee with the Petroleum Ministry is the one officially in charge of pricing gasoline and diesel fuel.”
“Nobody knows for sure when the world will get out of the coronavirus crisis and there is no doubt that the country’s sovereign revenues will be adversely affected by this pandemic, and so we are trying to take preventive measures that aim to boost the state’s revenues and soften the blow of the crisis on poor and limited-income citizens,” Maait said.
Meanwhile, Minister of Planning and Economic Development Hala Al-Said told the Budget Committee on Sunday that the International Monetary Fund (IMF) has cut its growth outlook for Egypt in fiscal year 2020-21 to two per cent from 3.5 per cent. “Other financial institutions, however, forecast that Egypt will be the only Arab country to realise positive economic growth and that the country will achieve a growth rate of four per cent,” Al-Said said, indicating that the Ministry of Planning also forecasts that Egypt’s growth outlook for 2020-21 will be four per cent.
According to Al-Said, the Egyptian economy was “doing excellently” until March. “But we expect that our economic growth will go downward between April and June (the last quarter of the current fiscal year 2019-20) due to the coronavirus crisis,” Al-Said said, adding that “if the crisis continues to bite until the end of this year, we expect another scenario in which growth projections would be further lowered to two per cent or as expected by the IMF.”
Prime Minister Mustafa Madbouli revealed on 29 April that Egypt would be seeking a new package of financial assistance from the IMF. “This package is important to preserve the successes achieved by the economic reform programme and help us contain the negative financial impact of the coronavirus crisis at the same time,” Madbouli said, indicating that “the expected package with the IMF will not lead to any rise in prices.”
Head of parliament’s Budget Committee Hussein Eissa described the 2020-21 budget, which was referred to parliament on 30 March as “the crisis and priorities budget”.
“The global economic recession caused by the coronavirus crisis will exert negative pressure on the Egyptian economy,” Eissa said, adding that “this should force us to rethink our financial and monetary policies.
“From now on, we have to focus on productive sectors, particularly industrial and agricultural activities,” Eissa said, adding that “tourism and stock exchange activities are important but they are highly vulnerable to global crises and this is the lesson we should draw from the current crisis.”
*A version of this article appears in print in the 7 May, 2020 edition of Al-Ahram Weekly