Budget plan raises concerns among experts
Egypt’s approved 2011-2012 fiscal year budget plan, which still carries a high deficit and no plans for accepting foreign loans, raised concerns among experts in an economy that has been pummeled by a revolution.
In the second draft of the budget, which was approved by the country’s ruling military council, expenditures will be LE 491 billion, while deficit is set at LE 134.3 billion, 4 billion higher than last year.
Minimum wage, on the other hand has been reduced to LE 684, after Egypt’s new cabinet had proposed last month that it would be LE 700.
Government employees, who are two million, will be receiving LE 9 billion in wages.
Health expenses decreased from LE 24 billion to 23.8 billion, while education spending went from LE 55 billion to LE 52 billion, and housing from LE 21 billion to LE 16.7 billion.
Hossam El-Hamalawy, Egyptian socialist activist known for his famous blog, Arabawy, which discusses Egypt’s politics and social issues, labels these moves as “shocking” and austere measures.
Experts, however, believe there are vital steps the government has not considered when devising the budget.
“The government has pursued the budget as if it’s capable of doing it completely on its own,” said Magda Kandil, executive director for Economic studies.
“I don’t think the government will able to get to the solution on its own, they have to work closely with the private sector, the businesses, and the economists.”
Currently, the new budget cut down subsidies and grants from LE 95 billion to LE 90 billion.
For Kandil, this number is not enough especially when the government does not spend “wisely.”
“The way this money is spent could be revisited in order to really be providing social justice,” she said. “We could put this money towards education, health, and several other departments that need improvement in the country.”
As investor confidence has been shaken after the events of the January 25 Revolution, Kandil believes that the budget’s approach to overcoming obstacles will also have to change.
Revising the way the country deals with the private sector is crucial as they will be valuable in moving the country’s economy forward during this murky transition.
“Whatever the government tries to do at this point will be very little and it may not help,” she said.
“Policy should be focused on supporting the private sector, the budget is one instrument and this is why we’re trying to advise the government on what to do.”