Egypt’s defective budget: Inaccurate estimates and imbalanced austerity

Egypt’s government budget, even though approved by the pro-government parliament, is still raising critical comments from the few members of parliament who attempt to keep independent states amid a puppet parliament.

MP Suleiman Wahdan criticized the imbalance in austerity policies the government declared to assume during the upcoming period. “In light of the current global conditions and the successive economic changes we are witnessing, we will restructure the state budget for the next fiscal year. The priority will be to provide programs for social protection, besides achieving full financial discipline in spending and even austerity in several issues,” said PM Moustafa Madbouly last March. However, Wahdan noticed that the number of consultants and experts working in governmental institutions, and the salaries they receive, require oversight and accountability. Wahdan also hinted at the ongoing bleeding of the economic bodies’ losses and the absence of plans to rationalize governmental loaning. The economic bodies, such as Suez Canal Authority, New Urban Communities and the Egyptian General Petroleum Corporation, are state-owned enterprises that receive governmental funds while having independent budgets. Those bodies, 59 in number, fail to achieve profits, compensating the governmental fund and burdening the public budget with net losses while the parliament has no chance to review their budgets.

MP Dia Daoud also addressed the compensations of the members of the Elections National Authority, which operates seasonally but receives high compensations such as 30,000 pounds extraordinary efforts allowance every three months, 36,000 pounds allowance for exceptional efforts in the month of Ramadan, 36,000 pounds outstanding efforts during Eid al-Fitr, and 20,000 pounds bonus and summer resort allowance in June, while in July and August, each member receives 72,000 pounds for each month. The previous extras bring the total compensation of every member of the Elections National Authority to about 356,000 pounds (19 thousand dollars) apart from their basic salaries. This is while the minimum wage is 2,700 pounds ($144) monthly. MP Ehab Mansour, head of the parliamentary bloc of the Egyptian Social Democratic Party, revealed that the government, instead of raising farmers’ subsidies to encourage them to increase production to face the local and global food crisis, has reduced farmers’ contributions, which are already low, from 664 million pounds to 544 million pounds.

The most dangerous point, however, is the arbitrary estimates made by the government for the budget, without revising them to align with the economic developments that Egypt and the world are witnessing. For example, the government estimated the interest rate in the new budget at 9%. In comparison, the Central Bank raised the interest rate during the last four months up to over 11.5%, and it is expected to be increased in the next meeting of the Central Bank’s Board of Directors. This means that the interest on loans in the new budget will rise by at least 150 billion pounds than estimated. According to experts, each 1% increase in interest costs the public budget about 30 billion as debt service. Likewise, the government estimates the price of oil barrels at 80 dollars a barrel. In comparison, the price is currently about 114 dollars, and experts expect the price to remain above 100 dollars during the upcoming period, which means that the government will have to request new loans to meet the deficit.