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Tuesday, 22 June 2021

Egypt parliament discusses new budget

Parliament has begun discussing the state’s 2021-22 budget and development plans

Gamal Essam El-Din , Tuesday 13 Apr 2021
Parliament discusses new budget
Hala El-Said

Egypt’s 2021-22 draft budget and development plans are now with the Budget Committee of the House of Representatives, the lower house of Egypt’s parliament, for discussion.

According to Fakhri Al-Fiqi, chair of the committee, the discussion will take place in hearings to which the ministers of finance and planning will be invited over the next two weeks.

“All of parliament’s 25 committees will also examine the budget and give comments and recommendations at the end of the process,” Al-Fiqi said.

A Finance Ministry report said the new budget aims to maintain financial stability, achieve fiscal discipline, contain the negative impacts of the Covid-19 pandemic on the economy, and stimulate economic activity by introducing a new package of investment incentives.

Minister of Finance Mohamed Maait told the cabinet on 24 March that the new budget focused on boosting economic activity, particularly in the industrial and exports sectors. “The budget allocates LE6 billion to industrial and export-promotion programmes and LE2.1 billion to funding the national project to switch vehicles to natural gas instead of diesel and petrol,” Maait said.

The report said the draft budget targeted revenues of LE1.3 trillion ($82.7 billion), up from a projected LE1.17 trillion in the current 2020-21 budget. “The government is targeting an annual increase in revenues of 16.4 per cent, to be primarily achieved by expanding the tax base, automating tax operations, activating electronic payment methods, and maximising the financial returns on state assets,” the report said.

Maait said one of the main goals of the new budget was to finance improvements in the country’s infrastructure. “This will come about through upgrading public services, raising the quality of public utilities, modernising villages, and streamlining drainage and canal systems,” he said.

The report said the budget also aimed to keep the national debt under control. “It is very important that the negative impacts of the coronavirus pandemic do not let public debt increase or lead to a downgrading of Egypt’s positive financial situation, as reported by international credit agencies,” it said.

“In this respect, the budget aims to cut the budget deficit to 6.6 per cent of GDP, achieve an initial annual surplus of 1.5 per cent of GDP, up from 0.9 per cent in 2020-21, and target overall economic growth of 5.4 per cent of GDP in the new fiscal year, up from 3.3 per cent expected in the current budget.”

However, MPs complained on Sunday that the poor performance of state economic authorities and public-sector companies had led to increasing public debt. Al-Fiqi said that while the government was doing its best to stem the tide of debt, loss-making economic authorities and public-sector companies were still borrowing heavily from local banks and foreign institutions.

“This leads to an exacerbation of the debt crisis,” he said.

The ministry report said increasing spending on social programmes was an important part of the new budget. “The new budget allocates LE9 to LE10 billion to subsidising the electricity and natural gas used by the industrial sector, LE87.8 billion to subsidising supply commodities, and LE37 billion to the salaries and bonuses of state employees,” it said.

The budget allocates LE180 billion to raising the monthly incomes of 10 million pensioners, LE20 billion to funding the Takaful and Karama (Solidarity and Dignity) social-protection programmes that cover more than 3.5 million poorer families, and LE7 billion to offering free medical treatment and health insurance programmes.

The report said a main objective was to help the healthcare sector fight the coronavirus pandemic. “The budget will increase the financial incentives granted to healthcare sector employees by LE1 billion and to doctors by LE500 million,” it said.

Al-Fiqi told MPs on Sunday that the funding of social-protection programmes was an essential element of the new budget. “It is important that the government helps the poorer and limited-income classes, as they are the ones who shouldered the financial burdens of the 2016-19 economic reform programme,” he said.

Meanwhile, a Planning Ministry report has said the government’s 2021-22 development plans aim to improve the lives of Egyptians by allocating more investment to the education and healthcare sectors. “The new plans also seek to contain the negative impacts of the Covid-19 pandemic on the socio-economic conditions of poorer citizens and alleviate poverty in the countryside,” it said.

The plans focus on investing in highly productive sectors, including manufacturing industries, telecommunications, information technology, and agriculture.

Minister of Planning and Economic Development Hala Al-Said told MPs on Sunday that the new development plans aimed at increasing the economic growth rate to 5.4 per cent in 2021-22.

“In the new plans, we are targeting LE1.3 trillion in overall investments, of which LE358 billion is to be spent on 12,000 projects throughout Egypt,” Al-Said said.

The report said that most of the projects in the new development plans focused on achieving President Abdel-Fattah Al-Sisi’s Decent Life initiative, implementing the national project for the development of the countryside, and establishing universities in most governorates.

“The plans also seek to implement 99 sanitary, drainage, and drinking water projects and to extend electricity coverage to Egypt’s southern coastline and North Sinai,” the report said.

Al-Said told MPs on Sunday that the results of the current 2020-21 development plans had been very successful. “We have so far been able to ride out the negative impacts of the Covid-19 pandemic, as we have managed to reduce unemployment rates, stabilise prices, and contain inflation,” she said.

“We, as Egyptians, feel proud that Egypt is one of the few countries that have achieved positive economic growth, and we are also one of the few countries that have spent huge amounts of money helping the poorer and limited-income classes” during the pandemic, she added.

She said that one of the main objectives of the new development plans was to stimulate economic growth, as this would further help to reduce the unemployment rate to less than seven per cent.

“The government’s refusal to resort to lockdown scenarios in containing the Covid-19 pandemic helped stimulate economic activity and create job opportunities,” Al-Said said.

*A version of this article appears in print in the 15 April, 2021 edition of Al-Ahram Weekly

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