The 2009/2010 state budget was finally approved by the People's Assembly, with the finance minister ringing alarm bells on the budget deficit and local debt, reports Gamal Essam El-Din On Tuesday, the overwhelming majority of the ruling National Democratic Party (NDP) gave thumbs up to the 2009/2010 state budget. Until this week's sessions of the People's Assembly -- Egypt's lower house of parliament -- opened on Sunday, NDP MPs were against the budget, insisting that its expenditures do not serve the interests of the poor and rather provide wealthy people and business tycoons with additional privileges. NDP MPs were especially angry that Finance Minister Youssef Boutros Ghali stood adamant against providing state employees with a social bonus of more than five per cent. For his part Ghali told MPs in a meeting last week with members of the Budget Committee that "raising the social bonus this year by more than five per cent would cost the treasury LE1.7 billion. We all want to raise the social bonus but the problem is: where should the money for this bonus come from?" To this Ghali added: "We have two options and both of them are bad: either cutting spending on vital investment projects in the areas of health and drinking water, or letting the budget deficit soar to more than eight per cent of the gross domestic product GDP, letting public debt hit alarming levels." Ghali painted a gloomy picture of the next fiscal year, arguing that the global financial downturn would cause a deepening economic slowdown in Egypt, bringing sovereign national revenues down by 22 per cent. Joining forces with Ghali, Ahmed Ezz, chairman of the Budget Committee and NDP heavyweight, also warned that a high social bonus this year would push the budget deficit to an unprecedented level. "This is a year of crisis and we should all be aware that a bonus of more than five per cent will force us to make a sharp cut in national investments aimed at creating jobs and offering indispensable public services," Ezz said. He further noted that the budget deficit is forecast to hit LE95 billion by the end of 2009/2010, more than eight per cent of GDP, skyrocketing from LE51 billion in fiscal year 2004/2005 or almost five per cent. On Saturday morning, however, President Hosni Mubarak surprised everyone including Ghali and Ezz, by ordering the government to give state employees a social bonus of 10 per cent. A presidential statement read: "In spite of the current economic hardships resulting from the global financial meltdown, President Mubarak ordered Prime Minister Ahmed Nazif that this year state employees and civil servants receive a social bonus of 10 per cent of their basic salaries." Mubarak's surprising decision was wholeheartedly welcomed by NDPs when parliament met the next day. On Ezz's part, he said: "I have no choice but to express my high appreciation of President Mubarak's decision which comes in favour of the poor and limited-income classes." He added that the implementation of the decision requires urgent negotiations between the Budget Committee and the finance minister. In putting the budget law to a vote on Tuesday, Ezz said negotiations led to an amend to the budget. "To begin with, an amount of LE1.7 billion will be allocated to fund the increase in the social bonus from five per cent to 10 per cent," Ezz said. Besides, Ezz added, money allocated to public investments will be also boosted by LE3.087 billion. "We agreed that raising the bonus should not stem the tide of spending on vital public investments," said Ezz. He, however, deplored that "the LE3.087 billion amount will come from borrowing and issuing treasury bills. This shows, as the finance minister and the Budget Committee have said before, that an increase in the bonus means an increase in debts and deficit." Ezz explained that as a whole, the increase in bonus allocations and public investments will widen the budget deficit by LE4.7 billion. In total, he said the estimated budget deficit for fiscal year 2009/2010 is estimated to stand at LE100 billion or 8.5 per cent of GDP. In their comments, MPs noted that there is a big cut in budgetary allocations to the two vital sectors of health and education. Hamdi El-Sayed, an NDP MP and chairman of the Health Committee, said "it is disappointing that the budget allocates a mere LE16.5 billion to the health sector or just 1.4 per cent of GDP. This is very low compared with most Third World countries, in which the health sector receives from seven to 10 per cent of GDP." Mohamed Farid Ismail, a Muslim Brotherhood MP, lamented that the cut in spending on health services means that the majority of poor and middle income Egyptians will remain unable to receive good services in public hospitals and rural medical units. Ismail also cried foul that while the Finance Ministry decided that health investments remain low, it approved boosting the volume of money allocated to promoting exports to LE4 billion. "This means that each rich exporter will get a subsidy of at least LE1 million at the expense of millions of poor people," said Ismail. All in all, the budget did not go down well with most opposition parties. The leftist Tagammu Party said the budget reflects the mentality of Finance Minister Ghali, who strongly believes in market and liberal policies favourable to the rich and wealthy businessmen. "This is very clear in the fact that most of taxes come from limited- income families while business tycoons and monopolisers enjoy unlimited government support," said a Tagammu statement. The liberal-oriented Wafd Party also rejected the budget, arguing that "it does not express a good government policy aimed at mitigating the effects of the global downturn on the Egyptian economy." Mustafa El-Said, an NDP heavyweight and chairman of the assembly's Budget Committee, told Al-Ahram Weekly that the global economic crisis should serve as a strong cause for the government to stop pursuing such liberal policies as privatisation and free trade. "We have to strengthen the role of the state and the government in the economy, as a guaranteed bulwark against global downturns," said El-Said. In its final form, budget revenues are expected to stand at a mere LE225 billion, compared to LE290 billion in 2008/09, while expenditure is targeted to reach LE326.7 billion, compared to LE341 billion in the current budget. The gap between revenues and expenditure will create a deficit of LE100.1 billion or 8.5 per cent of GDP.
