Egypt's military-approved budget could stall Morsi's plans

Ahmed Feteha, Tuesday 3 Jul 2012

Spending plans for 2012/13 give the country's new president little chance to implement his much-touted Renaissance programme, according to ex-finance minister

President Morsi will serve his first year in office using the budget approved by SCAF (Photo: AP)

Egypt's new state budget may give President Mohamed Morsi little scope for accomplishing the expansive social and fiscal reforms he promised during his election campaign, local economists say.

The country's 2012/13 budget, which took effect on 1 July, sees state spending rise to LE533.7 billion ($88.3bn), with the bulk of the sum already earmarked for specific functions.
Egypt's Supreme Council of the Armed Forces (SCAF) approved the document on Sunday night, following the council's assumption of certain legislative powers after the mid-June dissolution of parliament.
After 16 months of political uncertainty, Egyptians are expecting much from their first democratically elected president. The Freedom and Justice Party's much-touted Renaissance project pledged to bring prosperity to millions across the country.
During election campaigning, Morsi spoke of plans to raise subsidies for farmers, improve health and education, modernise irrigation and raise public investment in key sectors.
But the 2012/13 budget, drafted by a military-appointed Cabinet, has a substantially different focus. It is, critics say, very similar to previous Mubarak-era financial plans and gives the new president little room for manoeuvre. 
Around 80 per cent of spending is already set aside for public worker salaries, paying off Egypt's abundant debts and subsidies for food and energy.
"The state cannot fire government employees nor can it ignore its commitment in terms of debts or subidies," Samir Radwan, who served as Egypt's finance minister from February to July 2011, told Ahram Online.
"The current budget structure leaves just 20 per cent of total spending to be used on new policies -- this is not enough."
Such restrictions, says Radwan, mean Morsi's dream of a Renaissance may have to be put on hold, at least for the next fiscal year.
Any expansive budget would need a substantial increase in state revenues, according to Radwan, but this would in itself necessitate a shake-up of Egypt's tax system. The FJP's economic plans gesture to such a move but give few details on how it would be enacted.
Radwan's view that Morsi is essentially boxed in to spending plans outwith his control is reflected by officials close to the Islamist head of state.
One official from the Freedom and Justice Party went as far as to dub the 2012/13 budget as part of a "plot" to make Morsi's government fail.
Ashraf Badreddin, a member of Egypt's dissolved parliament and head of the FJP's economic policy committee, described the budget as "exactly the same as every other Mubarak-era budget."
Predicting the budget would make no difference to Egypt's deep-rooted problems, Badreddin suggested the public blame would likely fall on Morsi, who had no role in drafting the plans.
The budget, prepared by the interim government of Kamal El-Ganzouri, was presented to the parliament just a week before the assemby was dissolved by a court order. The draft document has been passed by the military council with no revisions.
Not everyone, however, is critical of the military-enacted budget.
Omneya Helmy, acting executive head of the Egyptian Center for Economic Studies (ECES) echoes Radwan's complaint about the need for changes in Egypt's public finances, but praises the 2012/13 plan for being a "positive" initial step.
"Change does not simply happen in a few days," Helmy told Ahram Online. 
"[By cutting industrial subsidies] there are large savings in the fuel expenses, and this makes more funds available to undertake policies that directly affect citizens' lives."
The amount spent on fuel subsidies is set to drop to LE70 billion in 2012/13, from LE95 billion in the previous budget. This will make up 62 per cent of Egypt's total subsidies bill of LE112.9 billion.
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