Egypt’s general budget suffers subsidy cuts and inappropriate allocations

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Mamdouh al-Wali, the economist and former Journalists Syndicate member, has revealed the state budget’s misappropriation of subsidies allocations. Al-Wali said that the budget for the current fiscal year 2020/2021 included providing subsidies of about EGP 53 million to the Opera House in return for allocating only EGP 20,000 to the university hospital in Kafr el-Sheikh Governorate.

Al-Wali’s article entitled “Irregular allocations on the Egyptian support map,” was published on his personal Facebook page and a news site and it sparked a shock among followers and anger at the government’s action.

Activists wondered about the beneficiary of this apparent imbalance and the intended deviation in spending when millions of citizens suffer from poverty and high living costs. Activists criticised the regime’s priorities, which are biased towards the rich and crushing the poor, as the al-Sisi regime removed support from citizens, which resulted in the deterioration of the living conditions of millions of citizens.

In his article, Mamdouh al-Wali revealed the allocation of EGP 25 million of support funds to the Administrative Control Authority. In comparison, the share of university hospitals in Sohag Governorate with the highest poverty rates among governorates was only EGP 40,000. The Supreme Media Council will get EGP 123 million from the support funds, while the directorates of veterinary medicine across the republic get only EGP 3.1 million. The National Press Authority gets EGP 360 million from the support, while the health directorates in the 27 governorates get only EGP 20 million from the support.

The Ministry of Supply

Al-Wali gave other examples of the current budget imbalance, including that the Civil Aviation Support and Development Fund received more than EGP 2 billion, while the agricultural directorates in all governorates allocated only EGP 5.3 million. The article criticised the misappropriation of subsidy funds in the current fiscal year budget of EGP 326 billion and the fact that the ministries of interior, foreign affairs, planning, tourism, communications, and defence obtained a share of the support.

It is noteworthy that the budget for the current fiscal year began to be implemented from the beginning of July 2020 and will end in June 2021, amid expectations that the budget deficit will rise to record rates. At the same time, tweeters expressed their dissatisfaction with the decline in government spending on education and health, even in light of the corona pandemic, as doctors and teachers complain about their low salaries and the support provided to the two most important sectors. Bloggers recorded their objection to the ministries of interior and defence receiving a share of the subsidy money, while no one knows anything about their budget or the size of their investments in light of the army’s control of the economy.

Last June, the Minister of Finance had expected an increase in the current fiscal year’s budget deficit rate to 7.8 per cent. Mohamed Maait, Minister of Finance, explained that if the COVID-19 crisis continues until the end of December 2020, the budget deficit will increase to 7.8 per cent compared to the 6.3 per cent targeted in the draft budget. Maait added that the ratio of public debt to the gross domestic product might also rise to 88 per cent in the new fiscal year, compared to the previously targeted 83 per cent if the crisis continues until the end of 2020.

Subsidy cuts

The strange paradoxes in the subsidy allocations in the general budget come at a time when the government reduced the size and weight of the subsidised loaf of bread and lifted subsidies on many of the ration goods that benefit the poor. Since 2016, the al-Sisi regime has initiated harsh economic measures to lift support, starting with liberalising the pound exchange rate in response to the International Monetary Fund’s conditions for a $12 billion loan.

The government gradually lifted subsidies on electricity, water, and fuel services, which led to an insane increase in citizens’ monthly bills. Over the past year, al-Sisi said that Egypt needs at least $ 1 trillion as a general budget to be able to solve all the problems it faces.