On Tuesday, Finance Minister Mohamed Maait presented the new 2024-25 budget to MPs, the first to be submitted to parliament following amendments to the Unified Public Finance Law.
The legislative changes, said Maait, have allowed the Finance Ministry to consolidate Egypt’s 59 state economic entities into a single Public Government Budget for the first time, with the goal of “reflecting fiscal reforms and showing the real financial capabilities of the state by consolidating all of its revenues and expenditures.”
Revenues are expected to increase by 36 per cent to reach LE2.6 trillion, and expenditure to increase 29 per cent to LE3.9 trillion, said Maait. Tax revenues will rise to LE2.2 trillion, up from LE1.5 trillion in the current fiscal year, widening the budget deficit to 7.6 per cent, up from 6.9 per cent in FY 2023-24.
“This slight increase is due to recent hikes in salaries and pensions and the increase in minimum wages directed by President Abdel-Fattah Al-Sisi,” said Maait.
Maait indicated, however, that the consolidated Public Government Budget will bring total revenues to LE6.4 trillion and the total expenditure to a total LE5.03 trillion.
“We have been faced with exceptional circumstances for four years now, beginning with the Covid pandemic, followed by the war in Ukraine and now the war on Gaza and attacks on shipping in the Red Sea,” said Maait, a combination of factors that has led to uncertainty among investors around the world, and among investors in the Middle East in particular.
Negative international developments, including the flight of capital from emerging markets and unprecedented rises in the cost of living due to hikes in international commodity prices, had left Egypt “facing a fall in revenues, particularly from the Suez Canal, tourism, and foreign direct investments.”
“We also anticipate a spike in energy prices and freight and transport costs on the back of the increased cost of cereals, particularly wheat, and fuel, and petroleum products,” said Maait.
The challenges required the Finance Ministry to prepare a budget capable of absorbing the economic shocks triggered by a global financial meltdown.
“The budget targets monetary and fiscal tightening, including off-budget capital expenditure, reduced inflation, and debt sustainability,” said Maait. To achieve these objectives, the budget aims for a four per cent growth rate, a narrowing of the budget deficit to six per cent and reduction of public debt to 80 per cent of GDP by June 2027. It places a ceiling on public entities’ annual debts and directs the primary surplus — and 50 per cent of revenues from the privatisation programme — to reducing outstanding debt in the upcoming fiscal year.
Maait added that the ceiling for government investments has been set LE1 trillion to allow the private sector to increase its contribution to the national economy to 65 per cent and create a million new jobs annually.
The government is also targeting a primary surplus of 3.5 per cent for the next fiscal year, compared to 2.5 per for 2023-24. The increase will come through taxes which account for 80 per cent of total government revenues. “We are targeting a 30.7 per cent year-on-year increase in tax revenues to LE2.2 trillion,” said Maait.
Work will continue to improve living standards by striking a balance between fiscal discipline and the impact of inflation. The new budget earmarks LE636 billion for subsidies, grants, and social benefits, including LE144 billion for ration cards and LE154 billion for fuel subsidies. The government’s salary bill will increase from LE411.9 billion to LE575 billion and Maait revealed more than LE40 billion will be allocated to the Takaful and Karama social programmes, up from LE 31 billion in the current fiscal year.
Education and health allocations will increase by 30 per cent, with the health sector budget growing to LE496 billion, the education sector budget to LE267 billion, and allocations for scientific research to LE140 billion.
Minister of Planning and Economic Development Hala Al-Said said Egypt’s socioeconomic development plan targets economic growth of 4.2 per cent in 2024-25, up from an expected 2.9 per cent by the end of the current FY.
“The drop in economic growth rates this year was triggered primarily by global economic and geopolitical crises,” she said.
Al-Said expected the value of Egypt’s gross domestic product (GDP) to reach LE17.3 trillion at current prices by the end of FY 2024-25, compared to LE13.9 trillion in 2023-24.
The new socioeconomic development plan targets general investments of LE2.25 trillion, up from LE1.65 trillion in 2023-24 and LE1.3 trillion in 2022-23.
“The increase is largely due to the private sector contribution which is expected to reach 48 per cent in FY 2024-25, up from 37 per cent in FY 2023-24, on the back of the new State Ownership Policy Document adopted in December 2022,” said Al-Said. The document seeks to double the private sector’s role in the economy to 65 per cent over the next three years.
The telecommunications, retail and wholesale, agriculture, real estate and social services (health and education) sectors are expected to be the triggers of this growth, said Al-Said.
The 2024-25 socio-economic development has three objectives for public investment: finalising investment projects that are already 70 per cent complete; establishing projects valued at LE150 billion as part of the second phase of the Decent Life initiative in rural Egypt, particularly in the health and education sectors, and exiting projects that can be funded by the private sector in line with the State Ownership Policy Document, said Al-Said.
Under the Decent Life initiative, the Ministry of Planning is aiming to rehabilitate 4,000 schools so they can accommodate increased student numbers, and refurbish 55 hospitals, 854 health units, and 1,584 youth centres.
Development plans also target an increase in the contribution of the renewable energy sector to 20 per cent of the national economy as steps are taken towards switching to a greener economy by implementing green hydrogen projects.
* A version of this article appears in print in the 25 April, 2024 edition of Al-Ahram Weekly
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