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Egypt 2011/12 deficit grows surprise LE170 billion

Pay rises for state workers and a drop in tax revenues caused a surge in the country's budget deficit last year, says finance minister

Ahram Online, Tuesday 11 Sep 2012
Momtaz El-Said
Finance Minister says state wage increases are to blame (Photo: Al-Ahram)

Egypt's state budget deficit for 2011/12 was far higher than forecast, driven by a large increase in the state wage bill and a drop in tax revenues, the Finance Minister said on Tuesday.

In a ministry statement issued, Momtaz El-Said said the deficit was revised upwards from LE134 billion, 8.6 per cent of Gross Domestic Product (GDP), to LE170 billion, 11 per cent of GDP.
El-Said put the unexpected surge down to an 11 per cent increase in the state's wage bill. Expenditure on wages reached LE122 billion, up from the LE100 billion initially forecast.
The climb, the minister said, was prompted by new demands by Egyptian labour in the aftermath of the January 2011 uprising.
A drop in tax revenues was also to blame, El-Said said. Revenues fell by around LE25 billion, mainly due to a slowdown in economic activity, amplified by labour unrest.
"The demands of certain sectors in the society [workers] has had a very negative impact on production, leading to a drop in tax revenues," El-Said added.
Another reason for the increase in the defict, according to El-Saeed, was the rising international price of oil, which added some LE30 billion to the country's energy bill.
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