CAIRO: The Cabinet submitted the final draft budget for FY 2014-15 that would raise state expenses by 10 percent, according Minister of Finance Hani Kadry Monday, coinciding with the first day of the presidential election.
The Cabinet submitted the budget to interim President Adly Mansour Monday for formal ratification before implementation in July, according to a Ministry of Finance press release, with about a week before Mansour’s successor will take office.
“The Mahlab administration is speeding up the budget so that Abdel Fatah al-Sisi [the heavy favorite to win] will wash his hands of responsibility for its endorsement,” Hani Tawfik, the head of the Arab Private Equity Association , told The Cairo Post.
The results of the elections will be announced June 5, less than a month before the end of the fiscal year on June 30. A budget submitted after a new Cabinet appointed by the president could not be finished in time for the new fiscal year, he said, adding however, that it would be within the power of the interim government to extend the current budget with the approval of the new president.
Tawfik said a new parliament could amend this budget, but this would be “too complicated”and “too late,” since governmental bodies receive their allocations in the new budget starting July 1. “These allocations are pumped into new projects, investments as well as specific expenses.”
In the budget draft, state expenses will rise to 807 billion EGP ($112.9 billion) compared to 742 billion EGP in the current fiscal year, said Kadry.
Financial allocations for the health sector, education and scientific research would total about 10 percent of overall spending, Kadry said, pointing out that part of these allocations will be directed to developing hospitals, applying minimum wages for doctors and building new schools.
In its latest bulletin, the Central Agency for Public Mobilization and Statistics (CAPMAS) announced 1.4 million people in 2012 were treated at the state’s expenses in comparison to 1.2 million patients the previous year. Meanwhile, the cost of treatment rose in 2012 by 2.7 percent, to 2.6 billion EGP compared to 2.1 billion EGP the previous year, it said.
The budget also predicts that the national deficit would rise to 12 percent of the GDP, about 288 billion EGP, compared with 11.5 percent of GDP predicted for this year, due to declining aid and grants from Gulf countries.
The minimum wage is maintained at 1,200 EGP ($167) per month for public employees, while the maximum wage is set at 35 times the minimum wage, and not to exceed 42,000 EGP.
The Ministry of Petroleum along with the Ministry of Finance will aim to slash oil subsidies by 30 billion EGP in the new budget, bring them down to 104 billion EGP, according to the statement.
The Ministry of Finance will also direct 34 billion EGP to subsidizing supply commodities, about a 10 percent increase over the previous year. This will include 2.6 billion EGP for wheat and 24 billion EGP for bread. Kadry said 67 million people will benefit from the subsidy.
The budget draft sets aside 38.7 billion EGP for insurance funds and pensions, a 33 percent increase compared to the year before. Twelve billion pounds will be used for cash subsidies and the social solidarity program will get an 8 billion EGP boost.
Abdel Mottalib Abdel Hamid, an economics professor at the Sadat Academy for Management Sciences, told The Cairo Post “increasing financial allocations along with the existing budget deficit will push the government to borrow more and impose short- and long-term treasury bills and bonds via the Central Bank of Egypt and the Ministry of Finance.”
Besides borrowing from the banks, covering the budget deficit and providing financial allocations will be the two main factors driving public expenses and the need to increase financial revenues. The increase in revenues will be achieved through imposing new taxes like mortgage taxes, wealth taxes and progressive taxes, and increasing investments and the selling of land.
He added however that the new budget’s increased spending is a step in the right direction despite concerns of how the government will cover these additional expenses.
“Cash support for the poor is a vital step toward restructuring the subsidy system, and is the best way to deliver subsidies to them,”Abdel Mottalib said.