While the government has adopted measures to mitigate the impact of soaring inflation on the country’s vulnerable classes over recent weeks, it also decided to increase spending on social security programmes and subsidies and grants targeting the poor and needy in the 2023-24 budget presented to the House of Representatives, the lower house of Egypt’s parliament, on Monday.
“Greater allocations for social security, grants, and subsidies in the new 2023-24 budget reflect the government’s efforts to widen the scope of the social safety net and mitigate the impact of soaring inflation triggered by the current global economic crisis,” said Finance Minister Mohamed Maait.
The new budget will continue spending on the Decent Life initiative designed to improve the lives of 60 per cent of the rural population and also increase allocations to the two vital sectors of education and healthcare.
“Allocations to the education sector will increase by 19 per cent to reach a total of LE305.2 billion, while those earmarked to the health sector will rise by 14 per cent to reach LE111.2 billion,” Maait said.
Spending on social security programmes, grants, and subsidies will increase by 28.2 per cent in the new budget, up from 17.1 per cent in the current one. Allocations for food subsidies will also rise by 20 per cent and fuel subsidies by 24 per cent.
The new budget will raise social spending to LE529.7 billion, including LE127 billion on ration cards, LE119.4 billion on fuel subsidies, LE6 billion on social insurance, and LE10.2 billion on low-cost housing.
LE31 billion will go to the Takaful and Karama (Solidarity and Dignity) programmes, among other things. Allocations for salaries will increase by 17.5 per cent to reach LE470 billion.
Maait said the preparation of the new budget came at a time of the current global economic crisis triggered by the Russia-Ukraine war, which was exerting tremendous pressure on the public finances of most countries, including Egypt.
There has been an unprecedented spike in the prices of basic food commodities and increases in the cost of imports due to disruptions to world supply chains.
The new budget shows a 41.2 per cent increase in revenues to LE2.1 trillion, while spending is 44.4 higher than the current budget to reach LE3 trillion. The increase in revenues stems from the government controlling public debt and an expected 28 per cent growth in tax receipts, Maait said.
“The automation of Tax Authority services will help to increase state revenues and merge informal businesses into the national economy and hence increase the number of taxpayers,” he added.
The budget targets economic growth of 4.1 per cent, and not five per cent as earlier expected and down from the 5.5 per cent targeted in the current budget, and a budget deficit cut to 6.9 per cent of GDP and not 6.1 per cent as earlier expected.
“We are pinning high hopes on the private sector being the locomotive of growth and the main generator of employment opportunities in the coming period,” Maait said, adding that “to help achieve this objective, the budget allocates LE28.1 billion to helping private-sector-led exports be more competitive on world markets and another LE19.5 billion to stimulating industrial and agricultural businesses.”
The value of public investments will be increased by 55.9 per cent to reach LE586.7 billion in the new budget and will be used to set up projects that can generate job opportunities and improve public services.
Meanwhile Minister of Planning and Economic Development Hala Al-Said told the cabinet on 29 March that the new State Ownership Policy Document adopted last December envisions more than doubling the private sector’s role in the economy to 65 per cent over the next three years, with a greater role for private investments in the new 2023-24 being expected.
“In the new 2023-24 socio-economic development plan, we have three objectives: completing investment projects whose implementation rate has exceeded 70 per cent; setting up projects that are part of the Decent Life initiative in rural Egypt, particularly in the health and education sectors; and exiting projects that will be funded by the private sector in line with the State Ownership Policy Document,” Al-Said said.
She said that the Ministry of Planning is aiming to set up 1,051 projects in the form of new schools that can accommodate an increasing number of students. In the health sector, investments will focus on building 657 projects, including hospitals, medical centres, and ambulance units.
This is in addition to building 339 projects in the form of new sporting clubs and youth centres.
* A version of this article appears in print in the 6 April, 2023 edition of Al-Ahram Weekly