Debate on debt

Gamal Essam El-Din , Wednesday 15 May 2024

Finance Minister Mohamed Maait has been heavily criticised by MPs over Egypt’s growing debt crisis.

Debate on debt

 

A parliamentary debate on the balance sheet of the 2022-23 budget saw Finance Minister Mohamed Maait respond to attacks from MPs from across the political spectrum.Budget Committee member Abdel-Moneim Imam described Prime Minister Mustafa Madbouli’s government as the worst in Egypt’s history.

 Speaking in a session on 7 May, Imam said “we are running in a vicious circle with public debt increasing year-on-year and service costs spinning out of control.”Leftist MP Diaaeddin Dawoud deplored that public debt had reached 85 per cent of GDP — up from 80 per cent in fiscal year (FY) 2021-22 — and warned that the recent Ras Al-Hekma deal which the government concluded with investors from the United Arab Emirates and financial pledges received from international lending institutions like the IMF and World Bank will do little to address the debt crisis.

Instead, he said, the crisis will grow worse because of the government’s extravagant spending on infrastructure projects.A report prepared by the Budget Committee said public debt had grown by 87 per cent over the last five years. The latest figures released by the Central Bank of Egypt showed foreign debt standing at $168 billion.Pro-regime MPs criticised the government for doing little to reform loss-making economic authorities.

 Fakhri Al-Fiqi, chairman of the Budget Committee, said out of a total of 59 economic authorities, 39 had managed to make combined profits of LE192 billion while 16 incurred losses of LE14.4 billion.”

A Budget Committee report identified four economic authorities as responsible for 95.6 per cent of the LE14.4 billion losses incurred in FY 2022-23. The National Media Authority incurred 73.3 per cent of the total, followed by the National Authority for Tunnels (31.1 per cent), Cairo’s Public Transport Authority (five per cent) and the Nuclear Power Plants Authority (4.2 per cent).

The report also noted the losses incurred by 16 economic authorities came despite their receiving LE486 billion in cash grants and contributions from the state treasury.Responding to the criticisms, Finance Minister Mohamed Maait defended the government’s performance, blaming higher global interest rates for the rise in debt service costs which reached LE774 billion in FY 2022-23, saying the Covid-19 pandemic in 2020, followed by wars in Ukraine and Gaza, had forced a hike in financing costs and negatively impacted the exchange rate.

 He also pointed out that public debt had declined from 114 per cent of GDP in FY 2013-14 to 82 per cent in FY 2021-22 before increasing to 85 per cent in FY 2022-23.Maait said the government had adopted a long-term plan to “reduce debt service costs to around 70 per cent over the last two years but falls in revenues resulting from the pandemic and the Ukraine war prevented its full implementation”.

He revealed the government’s new target is to reduce public debt to 80 per cent of GDP within three years.Maait said the introduction of electronic tax collection systems, a clampdown on tax evasion and efforts to integrate the informal economy saw tax revenues increase by 24.1 per cent by the end of March.

As part of its efforts to control the prices of essential goods, the Finance Ministry remained committed to exempting 57 basic food stuffs, including cooking oil, rice, and dairy products, from VAT.Reforming the financial conditions of the nation’s 59 economic authorities would top the ministry’s agenda following the ratification of a new unified public finance law to replace the current 64-year-old law, Maait told MPs.

He insisted that the economy was showing positive signs and that the government would target four per cent growth in the new FY and a reduction in inflation rates.Defending the Ras Al-Hekma deal, Maait said it had already generated LE177 billion in revenues to the state, amounting to 1.3 per cent of GDP, and that “this figure, plus revenues from other promising investment deals, will help revitalise the economy, improve financial conditions, and cut public debt and service costs.”


* A version of this article appears in print in the 16 May, 2024 edition of Al-Ahram Weekly

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