Egypt budget 2021-22: Deciding on spending plans

Gamal Essam El-Din , Wednesday 19 May 2021

The main features of the government’s new budget and development plans have been revealed over the last two weeks

Deciding on spending plans

The coming plenary sessions of the House of Representatives, the lower house of Egypt’s parliament, are expected to be devoted to discussing Egypt’s 2021-22 budget and development plans.

Fakhri Al-Fiqi, chair of parliament’s Budget and Planning Committee, said that the committee had lately held meetings at which the ministers of planning and economic development had been invited to present the new 2021-22 budget and development plans in detail.

“It was clear from the debate that the new budget aims to maintain fiscal discipline, stimulate economic activity, and observe social-protection objectives at the same time,” Al-Fiqi said, adding that “the new budget and development plans focus on improving the sectors of health and education in particular.”

Hani Sarieddin, chair of the Senate’s Economic and Financial Affairs Committee, told reporters that there was a significant increase in budgetary allocations and investment directed at the health and education sectors. “These two sectors were particularly hard hit by the Covid-19 crisis, and so it is important that their allocations increase to be able to get over the crisis,” Sarieddin said.

The Senate is the upper house of Egypt’s parliament.

At a meeting with the Senate’s Financial and Economic Affairs Committee, Minister of Planning and Economic Development Hala Al-Said said the Covid-19 crisis had led economic growth in Egypt to drop from 3.6 per cent in 2019-20 to 2.8 per cent in 2020-21.

“But we hope that we will be able to bounce back to the pre-Covid-19 level of 2018/19, achieving an economic growth rate of 5.4 per cent,” Al-Said said.

She said that the figures were in line with estimates made by international lending institutions. While the International Monetary Fund (IMF) forecasts an economic growth rate of 5.5 per cent in Egypt in 2021-22, up from 2.8 per cent in the current fiscal year, the World Bank expects a rate of 5.8 per cent.

Fitch Ratings, an international ratings agency, and the UK magazine the Economist put economic growth in Egypt next year at six per cent and 4.1 per cent, respectively. “All of these estimates are close to each other and all say that Egypt will be able to ride out the damaging effects of the Covid-19 crisis to a large extent and achieve reasonable positive economic growth,” Al-Said said.

She indicated that the new budget and development plans targeted an inflation rate of 5.6 per cent this year and six per cent next year.

The spike in economic growth, according to the minister, is expected to be boosted by a number of factors. “We expect remittances from Egyptian workers abroad to grow by seven per cent, or from $28 billion in the current fiscal year to $30 billion in the new 2021-22 year, not to mention the fact that the tourism sector will begin recuperating to generate $6 billion in 2021-22, up from an expected $3 billion this year,” Al-Said said.

She added that “Suez Canal transit fees are also expected to reach US$6 billion, foreign investment rates are forecast to increase to $7.4 billion in 2021-22, and non-petroleum commodity exports are targeted to increase by 10 per cent to hit a record of $19.5 billion.”

The health and education sectors will receive most government investment in 2021-22. “The investments in the health sector alone will reach LE47.5 billion in 2021-22 in order to help the state and medical institutions contain the Covid-19 crisis,” Al-Said said.

The debate in the House’s Budget Committee indicated that the government has set aside a budget of LE108.7 billion for the health sector in 2021-22, up from LE93.5 billion in the current 2020-21 fiscal year.

Sami Al-Hodod, head civil servant at the Health Ministry, told the committee that “the budget also made an allocation of LE31 billion to the Health Ministry’s population department, up from LE27 billion in the current year, an allocation of LE62 billion to the Health Ministry’s hospitals, and LE4.4 billion to the ministry’s research and development sector.”

According to Al-Hodod, LE15.5 billion has so far been spent on containing the Covid-19 crisis between the second half of the 2019-20 and the 2021-22 fiscal year. “The government is expected to spend an additional LE6.4 billion on fighting the Covid-19 pandemic during the 2021-22 fiscal year,” he said.

The debate in the House Committee also indicated that the budget of the education sector would reach LE109 billion in 2021-22, up from LE99 billion two years ago. MPs, however, complained that the increase was modest and not enough to achieve a significant increase in teachers’ salaries.

 Al-Said said the volume of investment earmarked for the education sector in the new development plans was estimated at LE56 billion. “These investments will focus on building more schools, raising the quality of education, and improving teaching methods,” she said.

The debate also focused on the social aspects of the new budget. Minister of Finance Mohamed Maait told MPs that budgetary allocations to social-protection programmes, including subsidies and grants, would reach LE321.3 billion.

Abdel-Hadi Al-Qasabi, chair of the House’s Social Solidarity Committee, said the social protection figures in the new budget showed that the government was giving the utmost importance to improving the living conditions of the poorer and limited-income classes. “The budget aims to create a social safety net that can meet the needs of poorer people,” he said. 

Ahmed Khattab, head of the Social Solidarity Ministry’s Financial and Administrative Affairs Department, said the budget allocated to the ministry had increased by 4.15 per cent, to reach LE20.4 billion in the new fiscal year.

“The budget will be used on social protection programmes such as the Takaful and Karama programmes which target fighting poverty in the countryside and poorer districts in terms of offering cash subsidies and other social benefits,” Khattab said.

Maait said that subsidies allocated to commodities, particularly bread, would be increased by LE2.7 billion to reach LE87.2 billion in the 2021-22 budget. “This increased allocation will help 71 million citizens get subsidised bread and cover 63.6 million citizens holding ration cards,” Maait said.

He said greater allocations to social protection programmes in the new budget would not lead to widening the budget deficit in the new year. “The new budget targets greater revenues from taxes, particularly the income and value added taxes,” Maait said. “We are also targeting increases in revenues from non-tax sources,” Maait said, adding that “initial estimates show that the overall budget deficit will be cut to 6.7 per cent of GDP in 2021-22, down from 7.7 per cent.”


*A version of this article appears in print in the 20 May, 2021 edition of Al-Ahram Weekly


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