Objections from opposition deputies didn't stop parliament from approving the 2010/11 budget, Gamal Essam El-Din reports Before being approved by the overwhelming majority of deputies of the ruling National Democratic Party (NDP) last week, the state budget 2010/ 2011 had faced acrimonious objections from opposition and independent MPs in the People's Assembly, Egypt's lower house of parliament. Muslim Brotherhood MPs mounted a verbal assault on Ahmed Ezz, chairman of parliament's Budget Committee and the NDP's secretary for organisational affairs, taking him to task for "pushing a hasty approval of the budget in parliament". "You exploit your own influential positions in parliament and the ruling party to compel NDP MPs to rubber-stamp the budget without adequate discussion," said Brotherhood MP Ahmed Diab. In response, Ezz lashed out at Brotherhood MPs, accusing them of "pursuing the old-fashioned communist style of citing false figures to paint a misleading and black picture of the economy". Addressing the People's Assembly earlier this month, Minister of Finance Youssef Boutros Ghali explained that the new 2010/2011 state budget was designed to serve two primary goals. "First, the budget mainly aims at paving a new path for the Egyptian economy based on achieving higher growth rates and closing the budget deficit." In Ghali's words: "Our economy has been successfully able to weather the fallout of 2009's global financial storm, and now it is high time for this economy to recover a growth rate of more than seven per cent and to close the budget deficit." Ghali explained that the budget puts government revenue at an estimated LE280.7 billion in fiscal year (FY) 2010/2011, compared to LE258 billion in FY2009/10. "This growth in revenues reflects expected improvement in the performance of our economy in the post-crisis period," said Ghali, adding that, "total tax revenues are anticipated to register an increase of LE26 billion, topping in total to LE197 billion in FY2010/11." On the other hand, Ghali said the budget puts public expenditure at an estimated LE394.5 billion, compared to LE355 billion in FY2009/10. This, he added, puts the monetary budget deficit at LE113.8 billion, or 8.3 per cent of GDP. Ghali, however, expects a LE105 billion deficit for FY2010/2011, or 7.9 per cent of GDP, compared to almost LE100 billion in the previous budget, or 8.5 per cent of GDP. Ghali indicated that there is a reduction of 0.5 per cent in the budget deficit, stressing that the government has the long-term goal of halving the budget deficit, to be gradually brought down to just 3.5 per cent of GDP over the next five years or by the end of 2015. "We hope that further fiscal reforms will push overall state revenues to LE525 billion in 2015, and the economic growth rate to an unprecedented 8.5 per cent," said Ghali. Parliament approved last week a government proposal aimed at raising the sales tax on steel to eight per cent from five per cent and imposing a five per cent sales tax on cement instead of the current flat fee per tonne. Ghali said the tax rise is projected to generate more revenues to bolster the government's attempts to close the budget deficit. Opposition MPs, however, begged to differ. They wondered how "Ghali could imagine a reduction of the budget deficit in the coming years at a time the government has raised Eurobonds worth $1 billion and $1.5 on the world market." Ibrahim El-Gaafari, Brotherhood MP for the city of Ismailia, said, "this will be at the expense of the next generation who will be obliged to pay back these debts," asserted El-Gaafari. Minister Ghali said that the government is aiming for a 0.5 per cent deficit reduction in the next fiscal year. "Our economy has recovered from the global crisis, but not fully, so I want to make sure that we are on a self-sustaining path before I start really cutting down the budget deficit," Ghali said, affirming that "the revenues of the Eurobonds are primarily aimed to ensure that the country goes on the road of sustained economic growth." The discussion of the budget deficit got heated over the thorny issue of "subsidies". Ezz indicated that the new budget allocated close to LE116 billion for subsidies and other social benefits. This, he added, is more by LE20.7 billion than last budget's figure. Ezz lamented that out of this huge amount, as high as LE67 billion is projected to go to subsidising petroleum products such as gasoline, diesel, kerosene and butane gas. "Let's recall that subsidies allocated to these products in the budget of 98/1999 did not exceed LE1 billion," said Ezz, wondering why "gasoline sold to owners of expensive 1300cc cars should be subsidised." "Isn't it more rational to allocate subsidies to the poor classes who are in a pressing need of subsidised services?" Ezz warned that this kind of fuel subsidy puts the General Egyptian Organisation for Petroleum (GEOP) under severe financial pressure. "Open subsidies for gasoline alone far exceed money allocated for spending on education and health, not to mention that the GEOP has become burdened with annual financial losses of LE20 billion and financial obligations of about LE103 billion," said Ezz. Joining forces with Ezz, Minister Ghali also lamented that fuel subsidies have skyrocketed in recent years. "However," he indicated, "the government has developed a five-year plan for rationalising fuel subsidies and financially restructuring the GEOP." In response, opposition MPs accused Ezz and Ghali of double standards. "While Ghali and Ezz lament that subsidies granted to petroleum products have soared, they ignore that the budget directs huge subsidies to wealthy businessmen," said Brotherhood MP Hussein Ibrahim. A case in point, said Ibrahim, is that "a handsome subsidy of LE4 billion is allocated to wealthy exporters and LE36 billion to energy-intensive industries owned by business tycoons." Ezz strongly denied that "energy-intensive industries receive subsidies". "In 2007/2008 fiscal year," indicated Ezz, "subsidies were removed from energy-intensive industries, including petrochemicals, steel and cement production." For their part, NDP deputies focussed on the necessity of allocating more money to sanitary drainage projects in poor villages in particular. Minister Ghali indicated that since 2007 LE4 billion has been spent on sanitary drainage and water projects. "In the 2010/11 budget, around LE3 billion is allocated to accelerate the implementation of such vital projects," Ghali added. Parliament also approved last week a 40 per cent tax on locally produced and imported cigarettes. Ezz indicated that this tax is projected to generate LE1.2 billion in revenues necessary to bear part of the cost of spending on vital sanitary drainage and water supply projects.
