On 19 March, President Abdel-Fattah Al-Sisi was briefed on the most prominent features of the draft budget in a meeting with Prime Minister Mustafa Madbouli and Finance Minister Mohamed Maait. The budget targets a GDP growth rate of five per cent, a primary surplus of 2.5 per cent of GDP, and a total deficit rate of 6.37 per cent.
“Government revenue is forecast to jump 31 per cent to LE2 trillion and spending to rise 30.5 per cent to LE2.838 trillion,” said Maait. The figures include a 15 per cent increase in public sector wages, a 24 per cent increase in subsidies, grants and other social benefits, and a LE512 billion allocation for investment.
“The draft budget takes into account the negative fallout from the global economic crisis which has led to a spike in oil and food commodity prices,” Maait continued.
“While the budget allocates LE150 billion in additional spending on social support programmes, it also aims to continue IMF-inspired economic and structural reforms to cut foreign debt, boost exports, stimulate industrial production and promote the private sector’s role in achieving economic development.”
In January, Maait announced that the government would conduct a public dialogue on the new budget in a bid to reach a consensus over public spending priorities. The proposed dialogue will include MPs, senators, representatives from the Federation of Chambers of Commerce, the Federation of Egyptian Industries, export councils, the Investors’ Union, and business associations.
Fakhri Al-Fiqi, chairman of the House of Representative’s Budget Committee, told Al-Ahram Weekly that “MPs expect to see budget allocations facilitate higher economic growth and at the same time soften the impact of soaring inflation, triggered by the global economic crisis, on the most vulnerable.”
He noted that the initial figures revealed by Maait show that the Finance Ministry wants revenues to outpace spending despite the fact that social protection initiatives introduced by President Al-Sisi earlier this month will cost between LE150 billion and LE190 billion and raise the deficit to 6.3 per cent of GDP.
“The figures so far are based on revenues growing by 31 per cent and spending rising by 30.5 per cent. Subsidies, grants, and other social programmes will cost LE486 billion in the upcoming FY, up from LE321.3 billion in the previous year,” he said.
Under the 2014 constitution, the draft budget must be submitted to the House of Representatives at least 90 days ahead of the beginning of the fiscal year on 1 July.
Yasser Omar, deputy chairman of the Budget Committee, expects the House speaker to refer the draft budget to the Budget Committee imminently. It will be reviewed by the committee over the next two months, after which a report containing the committee’s recommendations will be put up for a general debate among MPs in a series of plenary sessions.
“During the debate process, MPs can decide to increase spending but only after reaching agreement with the government on how to fund the increase,” said Omar.
“There is a consensus among MPs that the budget should prioritise social spending and mitigate the impact of inflation triggered by the devaluation of the Egyptian pound and the IMF-inspired economic liberalisation programme on the poorest.”
According to Madbouli, the cabinet is working on the assumption that President Al-Sisi’s new social package will cost LE190 billion, LE40 billion to cover the remaining quarter of the current FY 2022-23, and LE150 billion for the upcoming FY.
Mohamed Abdel-Hamid, second deputy chairman of the Budget Committee, said MPs expect the upcoming budget to observe fiscal discipline.
“This new budget could be termed an austerity budget inasmuch as MPs expect the government and cabinet ministers to set a good example by rationalising spending and reducing debt amid difficult economic conditions,” he said.
“The war in Ukraine and its global economic impacts will continue, exerting pressure in terms of continued high costs for energy and food imports. High debt servicing costs will also weigh heavily. Initial figures show that LE1.5 trillion — out of LE2.8 billion worth spending in the FY 2023-24 — will go to covering loan repayments and debt servicing.”
Budget Committee member Samira Al-Gazzar expects FY 2023-24 to be characterised by “economic and financial belt-tightening on the side of the government, restrictions on foreign borrowing, wide-ranging fiscal discipline measures and cuts to spending on national projects”.
Belt-tightening measures, however, “cannot come at the expense of social protection programmes aimed at the most vulnerable classes.”
Earlier this month President Al-Sisi announced a package of social measures including a LE1,000 increase in the monthly salaries of government employees, a LE300 monthly hike in the minimum wage for public sector workers, a 15 per cent increase in pensions and a rise in the tax exemption threshold from LE24,000 to LE36,000.
* A version of this article appears in print in the 30 March, 2023 edition of Al-Ahram Weekly