Egyptian finance minister Samir Radwan (Photo: AP)
A statement issued by the Ministry of Finance indicated that the reductions in the 2011/2012 budget deficit came as a result of consultation with the Supreme Council of the Armed Forces, Egypt’s de facto ruler since 11 February, and a social dialogue that the ministry called for during the preparation of the budget.
Egypt’s finance minister announced Saturday that the country will not need to borrow from the International Monetary Fund (IMF) or the World Bank. He stated that the ministry succeeded in reducing the budget deficit by LE27.3 billion, to reach 8.6 per cent of GDP instead of 11 per cent.
News agencies reported that Samir Radwan explained that the military council preferred not having large foreign debts, so as not to put pressure on the new government that will come after upcoming elections.
Radwan also indicated that the deficit will be covered through local borrowing as well as aid packages. The finance minister said that Qatar has provided $500 million as a “gift” for budget support.
There had been sharp public dismay at the interim government’s position towards financing the budget deficit through loans from the IMF or the World Bank, despite continuous official confirmations that loans would not entail any “veiled” conditions. The IMF agreed to a $3 billion 12-month standby finance arrangement for Egypt this month.
Up to last Tuesday, official circles were confirming that the loan acquiring process was proceeding successfully. Both the Ministry of International Cooperation and the World Bank denied news about the cancellation of a World Bank loan.
On Wednesday, Egypt's cabinet approved next's year budget, introducing severe cuts on the draft proposed by the Ministry of Finance in the beginning of June. Expenditure was reduced by LE27.3 billion, bringing the deficit to LE134.3 billion. Consequently, there was no need to resort to international borrowing.
Details of only LE 8.5 billion in cuts have been revealed so far, less than a week from implementation of the new budget.
A source at the Ministry of Finance told Ahram Online that another LE7 billion would be cut from public investment, without providing any further details. Ahram Online was unable to reach other officials at the ministry for comment.