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Thursday, 05 August 2021

Reading between the lines of Egypt's 2021-22 budget

Egypt’s 2021-22 budget prioritises spending on education, healthcare, social protection, and public investment, reports Al-Ahram Weekly

Nahla Abul-Ezz, Thursday 24 Jun 2021
Reading between the budget lines
Some LE12 billion has been allocated in the new budget for renewing or building roads
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Spending on education, healthcare, social protection, and investment is well positioned in Egypt’s new 2021-22 budget, which has been approved by the cabinet and the House of Representatives, the lower house of Egypt’s parliament.

Supporting economic activity, backing productive sectors and the people most affected by the Covid-19 pandemic, improving infrastructure, and delivering quality services to the vast majority of the population are some of the other aims of the new budget.

Total expenditure is estimated at LE1.8 trillion, while revenues are forecast to reach LE1.365 trillion. Taxes making up 70 per cent of revenues are expected to reach LE983.1 billion. Income taxes comprise 70 per cent of the total collected by the government, with the remaining 30 per cent coming from customs and taxes on real estate.

However, according to Alia Al-Mahdy, a Cairo University professor of economics, depending on taxes alone for revenues is not enough. There should be other revenues collected from the industrial sector and from production at large, she said.

In its 2021-22 budget, starting on 1 July, the government will be aiming to alleviate the repercussions of the Covid-19 pandemic on the economy and maintain the fiscal stability achieved during its economic reform programme of 2016-2019.

A recent fiscal statement revealed the government’s intention to maintain fiscal stability without compromising the sustainability of the budget and debt indices. It is targeting lowering the total deficit to 6.7 per cent of GDP and achieving a primary surplus of 1.5 per cent of GDP to ensure the stability of debt levels at 89.5 per cent of GDP, down from 90 per cent in 2020-2021 and 102 per cent the year before.

Hassan Ouda, a professor of accounting at the German University in Cairo, told Al-Ahram Weekly that the figures were reassuring, especially because the government wants to decrease public debt and the $125 billion foreign debt.

Egypt’s strategy to lower the debt is centred on prolonging its maturity, diversifying the debt instruments concerned, and tapping new markets with lower interest rates, Ouda said.

Wages and compensation for employees are granted LE361 billion in the new budget, representing one third of expenditure. Allocations for wages stood at LE225 billion in the 2016-2017 budget. Allocating one third of the budget to wages could be an indication that the state’s administrative apparatus needs restructuring, Ouda added.

The allocation for subsidies sees an increase in the new budget to LE321 billion, up from LE231 billion in 2016. The subsidies will be directed to limited-income strata of the population. One third of the sum will be directed to subsidised food commodities, and LE19 billion will go to the Takaful and Karama (Solidarity and Dignity) social protection programmes to offer cash support to more than 3.6 million households.

Ouda praised government efforts over the past two years to increase spending on social protection programmes and subsidised food commodities to alleviate the repercussions of the earlier economic reform programme.

The government is targeting boosting public investment to LE358 billion, an increase of 27.6 per cent, to improve the quality of public services.

Some LE12.1 billion has been allocated in the new budget for renewing or building roads as part of the first phase of the national project for road networks, bringing the total cost of the project thus far to LE17.5 billion.

The project also helps in generating job opportunities and achieving equality in water distribution, the government has stated.

It is part of government efforts to improve infrastructure and utilities, promote development in the healthcare and education sectors, and support national projects. Some LE700 billion has been earmarked for the development of 4,584 villages.

Al-Mahdy hailed the fact that despite the problems that had come in the wake of the Covid-19 pandemic, the government had not dropped its obligations towards the healthcare, education, and social protection sectors.

The new budget allocates LE172 billion to education, up from LE157 billion this year. Around LE109 billion will go to the healthcare sector, up from LE93 billion in fiscal year 2020-2021. As the two sectors’ budgets make up 10 per cent of GDP, each should be allotted LE250 billion, a target the government is working to achieve for coming years.

According to Egypt’s 2014 constitution, spending on healthcare and education together should reach 10 per cent of GDP.

The new budget also allocates LE4.2 billion to support and develop exports, in addition to paying LE6 billion to the banks as part of an early payment initiative to pay 85 per cent of late dues to exporters.

This reflects the government’s desire to support the export sector during the pandemic as one of the pillars of the national economy and to quickly respond to delayed dues owed to exporters.

*A version of this article appears in print in the 24 June, 2021 edition of Al-Ahram Weekly

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