Egypt's draft 2012/13 budget falls short of revolutionary expectations, writes Niveen Wahish The government is late in presenting the budget to parliament this year. It should have presented the budget in March, but it has only just finished off writing it up and getting it approved by the Cabinet. And with parliament in recess until after the first round of elections, it will not be presented before next week. While expenditures are set to reach LE533.4 billion, revenues have been estimated to come to LE393.4 billion. A cash deficit of LE140 billion and an overall deficit of LE135 billion is expected. Social justice and economic growth is what Minister of Finance Momtaz El-Said has said will be the aim of the budget. Yet according to international finance expert Doha Abdelhamid, the budget fails to show how it will achieve that. In fact, she finds that the growth target set by the government of around 3.5 per cent is ambitious given that growth in the current year was below one per cent. Egypt's economy grew at 0.4 per cent in the second quarter of 2011/12, but according to statements by minister of international cooperation and planning this week, it grew by 5.2 per cent in the third quarter which ended March. The government has said that it will meet its target of social justice through some LE136.6 billion set aside for wages, LE146 billion specified for financing subsidies and social benefits, and additional government investment set to reach around LE55 billion. For Abdelhamid, the 2012/13 budget is no different from budgets of past years. "It is not the budget of a national salvation government," she said. Yet she understands the political complications, not least because those drawing out the budget do not know if they will be there to implement it, so it does not include drastic changes. El-Said has said that no new taxes will be imposed, not even a capital gains tax. He said that the government is currently reviewing the income law to examine whether a progressive tax limited to the existing 25 per cent can be imposed. It is also studying if it can modify the sales tax, without upgrading to a value added tax, which still needs further work before application. He also said that the government would present to parliament along with the budget a suggested modification to the property tax. The modification entails the application of the law starting 1 July 2012. It also exempts a person's first home from the tax. Notably different about this budget is a cut in fuel subsidies from LE95 billion to LE70 billion and an increase in bread and fuel subsidies to LE26.6 billion. Yet how the savings will be made and their feasibility is vague, said Sameh Attallah, economics professor at the American University in Cairo and advisor to the Abdel-Moneim Abul-Fotouh presidential campaign. He too does not see any difference between next year's budget and that of past years. "The government is unable to take any radical measures," he said, adding that even measures agreed to by people across the political spectrum were not enacted, such as the capital gains tax or progressive taxes, and even unemployment support. He questioned to what extent a new president will be obliged to stick to a budget he was not party to writing. This year, the budget is being presented in extraordinary times. It will have to be discussed and approved before the parliamentary recess at the end of June and before the beginning of the fiscal year on 1 July 2012. This means that the new president, whoever he may be, will not have a say in the budget. However, Abdelhamid pointed out, given that Egypt does not have a new constitution yet, the new president may revert to issuing draft laws to modify the budget without needing to go back to parliament, which "goes against everything we have been fighting for," she said. Abdelhamid laments the delay in presenting the budget to parliament because it means not only less time for parliament to examine government spending but for society at large to reach consensus on that spending. She would have preferred to see a budget focussed on results and qualitative improvements, rather than money being thrown at certain items. Egypt's finance minister has said that the government will inject investment amounting to LE55.6 billion, an increase of 18 per cent on last year. He also said the private and cooperative sector will contribute LE169 billion in investments. However, Abdelhamid wants to know how the governments plans to encourage the private sector to invest in the economy and pull it out of the doldrums. While the government foresees a cash deficit of LE140.3 billion and a total deficit of LE135 billion, 7.9 per cent of GDP, down from 8.6 per cent in the current fiscal year, CI Capital Research puts the deficit at 9.8 per cent. It estimates that 2012/13 revenues will reach LE373 billion, LE20 billion less than government estimates. And it estimates expenditures at LE530 billion. CI Capital also anticipates lower GDP growth, at 1.9 per cent -- substantially less than government forecasts.
