Egypt: Budgeting in the time of coronavirus
Gamal Essam El-Din, Tuesday 23 Jun 2020
Egypt’s 2020-21 budget has earmarked greater allocations to the health and education sectors

Following lengthy discussions on 16 and 17 June, parliament approved the state’s new budget and development plan for fiscal year 2020-21.

Head of parliament’s Budget Committee Hussein Eissa told reporters that the approval came only after the Ministry of Finance had decided to amend the budget to earmark greater budgetary allocations to the ministries of health and education to help them contain the spread of the Covid-19.

“In the committee’s report on the budget, we recommended that the allocations to the health and education sectors be increased to help fight the coronavirus, raise the salaries of doctors and medical staff, buy drugs and protective equipment, and support university hospitals and scientific research,” Eissa said.

The approval had come after MPs saw that the budget sent signals that Egypt’s economy would be able to absorb the shock of the coronavirus and promote reasonable growth in the new fiscal year.

“Preliminary signals show that the state’s fiscal performance has significantly improved during the first half of 2019/2020, with the budget deficit cut to 5.5 per cent of GDP, down from 9.4 per cent four years ago [2015/2016],” Eissa said, adding that “public debt was also slashed from 90.2 per cent of GDP in June 2019 to 81.2 per cent in February 2020.

“These good financial results will help a lot in containing the negative impacts of the coronavirus on the national economy,” he said.

Parliamentary Speaker Ali Abdel-Aal said Egypt’s economic reform programme between 2016 and 2019 had been very successful, a fact highlighted by international financial institutions that had described Egypt as one of the most promising economies in the Middle East and in the world as a whole.

Even with the negative impacts of the coronavirus crisis, these institutions had still reported that Egypt would be one of the few economies to exit the crisis quickly and achieve reasonable growth in the new fiscal year, he added.

Abdel-Hadi Al-Qasabi, spokesperson of the parliamentary majority the Support Egypt Coalition, said that “most countries amended their budgets in the light of the coronavirus crisis, and Egypt was not an exception.”

Meanwhile, parliament’s leftist group known as the 25-30 Bloc attacked the budget, arguing that it adopted policies inspired by the International Monetary Fund (IMF) that came at the expense of the poor. Diaaeddin Dawoud, a leftist MP, said the social-programme allocations were “symbolic” and were not enough to help poorer citizens afford the costs of the coronavirus crisis.

“We are also seeing the government moving to draft new laws that will impose new taxes on citizens,” Dawoud said.

Addressing MPs on 17 June, Minister of Finance Mohamed Maait said Egypt’s budget for the 2020-21 fiscal year was estimated at LE2.2 trillion, LE1.7 trillion of which represented expenditure, up by LE138.6 billion from the 2019-20 budget.

Maait indicated that at the request of the majority of MPs, the Ministry of Finance had amended the budget to earmark greater allocations to the health and education sectors.

“We have allocated LE258.5 billion to the health sector (from an initially allocated LE255 billion), LE241.6 billion to the pre-university education sector, LE122 billion to the higher-education sector, and LE60.4 billion to the scientific research sector,” Maait said, indicating that the education budget had risen to LE423 billion, one billion more than initially planned.

This means that the total amount allocated to the health and education sectors has increased from LE545 billion in 2019-20 to LE682.1 billion in 2020-21, according to Maait. “This meets Egypt’s 2014 constitution stipulation that the state should allocate 10 per cent of GDP to the health and education sectors,” he said.

Maait indicated that the new Health Ministry budget would be allocated to help fight the coronavirus by employing 25,000 doctors in public hospitals, supporting health initiatives, and boosting the salaries of doctors and medical staff. “We have done our best to give all the necessary funding to this vital sector,” he said.

He said the 2020-21 budget had been drafted in the light of forecasts by the international institutions for the global economy in January 2020. “These forecasts took into account global oil and wheat prices, the movement of international trade, and international inflation rates,” Maait said.

He explained that the budget draft had been submitted to parliament in its original form in order to meet the deadline stipulated by the constitution before the end of March. “The other option was to change the draft at such a troubled time in violation of the constitutional deadline,” Maait said.

He said he had agreed with the Budget Committee to keep the draft unchanged, since if there was a need for changes the government could return to parliament and ask it to review them.

Eissa said “parliament and the Ministry of Finance will revise the budget figures at the end of each quarter to see what should change and what should be kept in place. It is an exceptional budget, and we should take this into account,” he said.

In social terms, Maait said the new budget amended the salary structure of state employees to help improve their financial situation. Salary expenditure would be increased by LE34 billion to reach LE335 billion, Maait, adding that employees working under the civil service law would be granted a seven per cent bonus, and those not subject to the law would be offered a 12 per cent bonus.

“This means that the salaries of state employees will be increased by an amount ranging from LE150 to LE375,” Maait said.

He also indicated that allocations to the state’s subsidy programmes had reached LE115.1 billion, LE84.5 billion of which will be allocated to ration cards and LE28.2 billion to vehicle fuel. LE3.4 billion will be allocated to subsiding public transport, and LE5.7 billion to low-cost housing.

Maait said that the 2020-21 budget would also see an unprecedented increase in pharmaceutical sector allocations, given that LE11 billion had been earmarked for the sector, up from LE 9.1 billion in 2019-20, to subsidise the purchase of baby milk.

“LE7 billion will be allocated to fund medical treatment for poorer citizens, up from LE6.6 billion in 2019/2020,” Maait said.

The new budget is expected to be ratified by President Abdel-Fattah Al-Sisi and go into effect on 1 July.

Minister of Planning and Economic Development Hala Sl-Said told MPs on 17 June that the third year (2020-21) of the state’s four-year development plan (2018-22) would be an exceptional one in the light of the coronavirus crisis.

“The new development plan is different in its objectives, targets, and priorities as it is focused on preserving the health of citizens, offering them reasonable medical treatment and helping them go back to their normal lives as soon as possible and with minimum economic damage,” Al-Said said.

She said the plan expected the global economy to shrink by three per cent in 2020. “As a result, the plan forecasts that Egypt’s economic growth will reach just 3.5 per cent, instead of the previously expected 5.8 per cent, due to the coronavirus crisis,” Al-Said said, arguing that the “global recession will have a negative impact on the Egyptian economy in terms of GDP.

“We have very conservative figures in this respect, as we expect Egypt’s GDP to reach LE4.2 trillion at fixed prices and LE 6.8 billion in current prices,” Al-Said said, indicating that promising sectors that would be the locomotives for growth in the new year included the construction, telecommunications, agriculture and pharmaceuticals sectors.

*A version of this article appears in print in the 25 June, 2020 edition ofAl-Ahram Weekly