Social justice was one of three foremost demands of the Egyptian revolution, yet the new budget is glaringly biased to the rich, prompting protesters to demand a redraft that addresses the country's glaring inequities The people may want a new budget but it appears Egypt's military rulers and its government don't agree. Prime Minister Essam Sharaf seems to have dismissed a key demand of the protesters on Tahrir Square, the writing of a new and poor-oriented budget. "It is not possible to withdraw the budget or to have a new one," Abdel Fattah El-Gebali, advisor to the Minister of Finance, told Ahram Online, responding to demonstators' demands that the budget, recently approved by the Supreme Council for the Armed Forces (SCAF) and accused of being biased towards the rich, be replaced. El-Gebali says he doesn't know of any official discussions concerning the abolishment of the current state budget, which came into effect on 1 July. "There may only be some modifications on the budget as we go, depending on circumstances," he said. On Sunday evening, Sharaf said there would be a ministerial reshuffle to exclude figures linked to the former regime from the cabinet. The name of Samir Radwan, the current Minister of Finance who was a member of the policy committee of the National Democratic Party, was not on Sharaf's list, despite popular resentment against his recently approved budget. When the SCAF blocked the interim government's plans to take on further foreign debt, the Ministry of Finance took the opportunity to cut public expenditure by a sum far higher than the loans it had requested. The new draft of the budget aimed for a fiscal deficit of 8.6 per cent, instead of its previous 11 per cent target, giving the message that controlling the fiscal deficit -- one of the main recommendations of the IMF -- is more important than expanding social spending. Wages, social spending and public investment saw the biggest cuts. Non-transparent cuts In what looked like an attempt to avoid criticism,just hours after it was publishedthe Ministry of Finance withdrew a table on its website that showed the details of all the cuts in the modified draft of the budget. The Ministry of Finance never kept its promise to Ahram Online to publish details of the budget changes, nor did the minister respond to repeated calls to disclose and comment on the modifications. This lack of transparency has contributed to the anger of protesters on Cairo's Tahrir and other squares around the country, as widespread sit-ins enter their fourth day and gain further momentum. Lists of demands announced by protesters on Saturday and Sunday included the abolition of the SCAF-certified budget, slammed by protesters as pro-rich, and the drafting of a new, socially driven one. Little is known about how budget cuts will affect wages and pensions, social spending and public investment. Cuts in all three would not only contradict promises of social justice, but also hinder Egypt's targeted growth rate of 3.5 per cent by suppressing local demand. Unjust tax system Another complaint is against the budget's plans for levying taxes. Egypt's lowest paid receive no tax breaks while no property or capital gains taxes are being levied on the rich. The government dropped a previously announced tax break for those earning less than LE12,000 per year, according to a 'before and after' reading of the state budget as published on the Ministry of Finance website. This step would save LE3.197 billion, shows the first draft of the budget. The original draft suggested raising the minimum taxable wage to LE12,000 ($2000) per year, up from LE9,000. But the government had to retreat later, in a step to trim public spending. At the other end of the scale, taxes on the wealthy suggested in the original draft were also cancelled. By dropping property and capital gains taxes, the budget removed potential additional income of some LE2 billion. Ahram Online has compiled a list of cuts on social spending: The minimum wage was reduced to LE684 from LE700 and will not apply to employees without permanent contracts. Pension reform was cancelled. Potential beneficiaries discovered the minimum pension would not be raised to LE300 per month as the Minister of Finance had promised. A promise to raise monthly assistance to Egypt's poorest citizens to LE200 per month was also not honoured. Unemployment assistance allocations were cut by half to LE1 billion. Allocations for the medical treatment state fund were also cut by LE500 million compared to the original draft. In addition, public investment was also cut by LE8.9 billion from its original LE55.9 billion total, according to unpublished data received by Ahram Online. The data didn't provide any details on the cuts but they will include spending in education, housing and health, according to Ashraf El-Araby, advisor to the Minister of Planning. The government will also abolish roads and bridges projects and reduce its annual target of 200,000 low-cost housing units, he adds. "The original plan was too ambitious anyway. The originally planned investments were more than the economy had the ability to provide," says Abdel Fattah El-Gebali, defending the cuts. Ashraf El-Araby explains that the government had to abolish public projects that were supposed to be financed through foreign debts and the budget deficit. "Even after reductions, [public investment] will still be above previous year's level," he says. The government is set to pour LE46 billion into the economy in 2011-12, against LE40 billion the previous fiscal year. Al-Araby says the government will rely on the private sector to fill the LE8.9 billion gap and ensure the rate of growth doesn't fall under a predicted 3.5 per cent. Many fiscal analysts are sceptical, asking why an expansionist budget is being rejected at a time when the risk-averse private sector will be wary of providing fresh investment.
