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Egypt ruling military approves tightening in spending in 2011/12 budget

State spending shrinks to LE491 million and minimum wage is reduced to LE684 from the LE700 pledged, reveals the final version of the Budget

Ahram Online, Monday 4 Jul 2011
Bread line
Life on the subsidised breadline. Egypt's interim government breaks pledges on social spending (Photo: AP)

The modified budget has been approved by Egypt's Supreme Council of Military Forces (SCAF) and includes spending cuts of LE39 billion, alongside an increase of LE2.5bn in revenues, bringing the deficit down by LE36.5bn.

This represents a 7.43 per cent cut in spending compared to the original draft.
The interim government believes such fiscal tightening is necessary after the SCAF banned it from signing foreign debts.
The details of the cuts remain a secret. The Ministry of Finance website gives no detailed information on what items of spending have been abolished. 
Ministers have only revealed reductions of LE3.5bn in energy subsidies, from a previous total of LE99.03bn. Unemployment benefit payments are also being halved, bringing their total budget burden to LE1bn.
Public investment was also cut by LE8.9bn, according to Ministry of Planning figures.
Egypt's military rulers have adopted the proposed budget for the 2011/12 fiscal year, two weeks after it was approved by the interim cabinet, said a statement from the Ministry of Finance on Monday.
According to the statement, state spending will be LE491bn, up 15 per cent on the current fiscal year, with 54 per cent devoted to social development. The government says it is committed to protecting low-income families from economic fluctuations, particularly the large recent hikes in world food prices.
The education sector is allocated LE52bn, a 10 per cent increase on the current fiscal year, while health provisions are up 17 per cent to LE23.9bn. 
The housing sector and community facilities are a significant proportional increase, up 39 per cent to LE16.7bn.
A total of LE118bn has been allocated for social protection for workers and pensioners, up 22 per cent on the current fiscal year, says the statement.
The sum includes the long-awaited increase in minimum wages for state employees, despite being less than previously announced: LE684 per month instead of the promised LE700.
The increase will cost LE9bn and is set to benefit 2 million workers -- and 15 per cent in workers' bonus payments, costing LE3bn.
The largest increase in social spending comes via pension reform and a plan to increase pensions by 15 per cent as of April 2011. The
Treasury is set to bear the LE6.5bn cost of the hike which is said to benefit 8 million employees.
Pension contributions will also rise to 30 per cent with the former pension 'ceiling' of LE100 being lifted in a bid to help improve pensioner living standards. It will cost the government an annual LE2.8bn, bringing benefits to some 7.5 million Egyptians.
LE1.2bn has also been allocated to cover the cost of annually raising pensions.
But all these increases are less than those promised before the tightening measures which included scrapping a mooted raise in the minimum pension, according to the Al-Shorouk daily newspaper on Saturday. 
The original version of the budget included an increase in minimum pension to LE300 instead of LE200, and doubling the pensions of the poor to LE200, in addition to other, small increases.  
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