Finance Minister Mohamed Maait and Planning Minister Hala Al-Said gave statements on the draft state budget and socioeconomic development plan for the 2024-25 financial year in the House of Representatives on 23 April.

Parliamentary Speaker Hanafi Gebali decided that the budget and plan should be referred to the House’s Budget Committee for discussion and that they should go up for a vote before parliament in a plenary session before the start of the fiscal year on 1 July.

Meanwhile, the socioeconomic development plan was also sent to the Senate for discussion and a vote in line with the constitution.

Mustafa Salem, deputy chair of the Budget Committee, told reporters that the committee was mobilised this week to discuss the budget and the plan with cabinet ministers. The House’s other 24 committees will also be involved in discussions over the budget and plan, and there will be a general report about the outcome of debates, he said.

 The final report will be a matter of discussion and a vote in plenary sessions in the presence of the finance and planning ministers, he added.

Salem indicated that Article 124 of the constitution gives the House the power to change the budget’s spending allocations, but only in consultation with the government.

He said that this year’s budget debate in parliament is different this time around, following amendments to the Unified Public Finance Law. The legislative changes will oblige MPs to discuss a Public Government Budget for the first time, including the state budget and the budgets of some 40 economic bodies in a first phase, he added.

Maait held a meeting with the House’s Budget Committee last week to address MPs and answer questions. He said that the new budget reflects many of the economic reforms demanded by the International Monetary Fund (IMF) as part of its loan agreements with Egypt.

 “Our new programme with the IMF requires that we adopt a monetary and fiscal tightening policy, including cutting public expenditure in a bid to reduce inflation and achieve financial stability,” Maait said.

As a result, public investments funded by the state will be cut by 19 per cent to give room to the private sector to expand its activities, raise its contribution to the national economy to 70 per cent, and create at least one million job opportunities each year.

Maait said the significant fall in revenues coming from the Suez Canal and tourism due to regional wars and attacks on ships in the Red Sea had led the government to focus on foreign direct investment (FDI) and privatisation deals as the country’s major foreign-exchange earners.

He argued that the fact that the country has also received pledges of more than $20 billion in foreign support, including $8 billion from the IMF, 7.4 billion euros from the European Union, and $6 billion from the World Bank, will help cushion the economy against any future shocks and reduce inflationary pressures.

In their questions to the minister, MPs showed concern about the country’s foreign debt and its impact on financial stability. In response, Maait said that the government has developed a long-term strategy on cutting foreign debt, which currently stands at around $168 billion.

He said the aim is for the debt to drop to less than 80 per cent of GDP by 2027. “This is a very important objective in order to be able to reach financial stability in two years and reduce the cost of debt-servicing in a gradual way,” Maait said.

He argued that the recent influx of foreign exchange meant that the country now depended less on short-term loans with high interest rates in favour of long and average-term loans with low interest rates.

“We are now moving on two fronts, the first of which is to prolong the country’s public debt maturity, and the second is to diversify our sources of financing to depend on low-cost and non-traditional tools like green bonds, Islamic sukuk, yen-denominated Samurai bonds, and the so-called Panda bonds,” Maait said, adding that the ministry has no plans to issue any bonds on world markets until the end of the current fiscal year on 30 June.

The budget report forecasts the country’s debt-to-GDP ratio falling to 89 per cent by the end of the current fiscal year from 95.7 per cent in the last fiscal year. It also expects that the country’s debt-to-GDP ratio will fall to 88.2 per cent in the next fiscal year and aims for the figure to be below 80 per cent by the end of 2026-27.

The report states that debt-servicing costs will increase by 34.9 per cent to LE1.8 trillion in 2024-25, up from LE1.4 trillion forecast for the current fiscal year.

Although MPs lauded the government for upping spending on social support programmes and subsidies to mitigate the impact of soaring inflation on vulnerable people, they said they wanted to see more.

MP Abdel-Moneim Imam, secretary-general of the Budget Committee and head of the opposition Justice Party, said the allocations for subsidies and social-security programmes in the new budget would do little unless the government does more to oversee retail markets and control prices.

In response, Maait said that “social spending in the new budget has increased by 20 per cent, and this is the best we can do because if we go further in this direction, we could end up having an uncontrollable budget deficit.”

The 20 per cent boost in social spending reflects the state’s commitment to supporting low-income groups, but at the same time it makes sure that this spending will not be excessive or harm fiscal and monetary reforms, Maait said.

The 2024-25 budget report said the government will spend LE635.9 billion next year, up from LE529.7 billion in 2023-24, as it pumps funds into subsidies to mitigate the impact of inflation and shore up the economy.

According to the report, allocations for ration cards will increase by 5.1 per cent in 2024-25 to LE134.2 billion, up from LE127.7 billion this year, while fuel subsidy allocations will inch up 29.4 per cent to reach LE154.5 billion, up from LE119.4 billion.
 

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