Egypt s parliamentary speaker Hanafy El-Gebaly. Al-Ahram
The bill is a government-drafted legislative amendment to Budget Law 74/2021, and is meant to help the state cover the increase in the bill of imports due to the war in Ukraine and the recent hike in interest rates.
"The conflict reflected negatively on the global economy, including in Egypt, in the form of a remarkable hike in the prices of basic commodities, a disruption in food supply chains, a dramatic rise in freight costs, and fluctuations in world financial markets, including Egypt's stock exchange," read an explanatory note submitted by the Ministry of Finance.
"As a result, the Central Bank of Egypt's Monetary Policy Committee had to intervene in terms of holding an emergency meeting (on 21 March) to help absorb the shocks and maintain Egypt's competitive edge," the note added.
"The CBE decided to raise deposit and borrowing rates, as well as credit and discount rates, in a bid to rein in inflation rates," said the note, adding that "the financial allocations earmarked in the current 2021/22 budget to cover the increased costs of servicing public debts and interest rate hikes during the remaining quarter of FY 2021/22 became no longer enough."
The note indicated that the 2021/22 budget had originally allocated an amount of EGP 579.582 million to service interest rates due on internal and external debts. "Out of this, an amount of EGP 411.943 million were already disbursed (until 22 March) and as result, it became necessary to make a change in Chapter 3 of the Budget Law, concerned with interest rates, in order to earmark an additional allocation of EGP 6 billion to cover the cost of the CBE's decision to devalue the Egyptian pound and raise interest rates in the banking market, two steps which led to raising interest rates on treasury bills issued by the government. The additional allocation of EGP 6 billion will be generated through borrowing and issuing financial securities and stocks."
Article 2 of the bill states that general financial resources will be increased in Chapter 5 through borrowing an amount of EGP 6 billion.
Article 127 of Egypt's 2014 constitution states that changes in the state budget or any of its chapters are allowed only after receiving the approval of the House of Representatives.