Rising food prices unlikely to affect Egypt budget deficit: Beltone Financial

Ahram Online, Sunday 23 Jan 2011

Increased government revenue expected to offset the demands of rising global food prices

Food Prices
A farmer wheat field in the Nile Delta town of Mansoura, Egypt. Photo/REUTERS

The continuing hikes in global food prices are unlikely to have a significant impact on the overall budget deficit, confirms a new release by Beltone Financial.

"Additional fiscal outlays as a result of a hike in global food prices are unlikely to have a significant impact on the overall budget deficit," Beltone expects.

According to the new release, Egypt's budget will not be affected by late changes in global food prices because "of the relatively smaller share of food subsidies of total fiscal expenditure (around 4 per cent of total spending, with wheat’s share at 3 per cent of total spending) compared to energy subsidies, which represents more than 15 per cent of total government spending and around 65 per cent of total subsidies."

The press release came after the ministry of finance yesterday ruled out requesting an additional LE4.5 - 7 bn to meet food price increases, saying the current funding provisions were sufficient to cover all General Authority for Supply Commodities (GASC) requirements which deems the need for requesting additional funds from Parliament unnecessary.

This follows a statement made last week by the minister of trade and industry, Rachid Mohamed Rachid, during the Arab Economic Summit at Sharm El-Sheikh, in which he said that Egypt may spend an additional LE 4.5 - 7 bn on food subsidies in the current fiscal year (2010/11) due to rising global food prices.

"We believe that the impact of additional fiscal outlays is likely to be diluted by the more notable improvements occurring on the revenue side of the budget as a result of the ongoing enhancement in the administration, collection and automation of government receipts," Beltone comments.

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