Countering the adverse effects of the global financial crisis on Egypt is what the government alleges to be the main focus of the new budget for 2009/2010, Gamal Essam El-Din examines these claims On Monday, right when a number of civil society organisations rallied to organise a national strike in protest against low wages and increasing unemployment, Prime Minister Ahmed Nazif addressed parliament about the main priorities of his government's new budget for the fiscal year 2009/ 2010. Unlike last year, when the budget was primarily drafted to face the challenge of high inflation rates and soaring food prices, Nazif said the main focus of the new 2009/2010 budget is to counter the adverse effects of the global financial crisis on the national economy. Nazif expected that the crisis and world economic recession will make unemployment the biggest challenge facing the government in the new fiscal year. "Initial figures show that the crisis will make unemployment figures jump to 10 per cent -- the highest in 10 years," said Nazif, noting that "every one per cent crunch in economic growth makes the economy lose 150,000 jobs." In the words of Nazif, the new budget's main objective is to stem the tide of unemployment. "The best way for meeting this objective is to boost public spending and not to fall prey to the monster of international and local recession," Nazif said. As a result, Nazif explained, the new budget aims to raise wages and salaries of public sector employees, civil servants and retirees by 11 per cent." This means that spending on public wages will increase from LE77 billion in FY 2008/09 to LE86 billion in the new 2009/ 2010 budget," said Nazif, emphasising that "the government will continue its long-term policy of boosting spending on services in the two vital sectors of education and health." Nazif said spending on education and health will increase from LE36 billion to LE48 billion and from LE13 billion to LE15 billion respectively. On a third front, Nazif said the government will continue to live up to its old promise of raising "the annual social bonus". This bonus rose steadily from 10 per cent in 2006, to 15 per cent in 2007 and to 30 per cent in 2008. "In discussing the new budget," said Nazif, "the People's Assembly in coordination with the government should decide how much the increase in this year's bonus should be." Nazif also stressed that the world recession will not discourage the government from doing its best to boost the volume of private investments. "We have a three-year programme for building 52 projects at a cost of LE114 billion," Nazif declared. Nazif expected that the above increases in spending will help stimulate the economy and greatly soften the blow of the global financial and economic doldrums on Egypt. "We have high hopes that increased spending in the new budget will not only cushion the blow of world recession, but also keep growth rates hovering around four per cent until we are able to grow at seven per cent again," Nazif said. Nazif also emphasised that the global financial downturn will by no means force the government to cut spending on social subsidies. "This is in spite of the fact that allocations for subsidies in the new 2009/2010 budget was cut to LE73 billion, compared to LE132 billion in the 2008/2009 budget," said Nazif. Further, he explained that the cut in budgetary spending on social subsidies was precipitated by the drop in prices of oil and wheat on global markets rather than by any politically-motivated orders. "The current low prices of wheat and oil products on world markets helped us in saving a lot of money without adversely affecting spending on social subsidies," he said. Nazif indicated that the amounts of money saved from the cut in budgetary spending on subsidies will be used in funding a part of the expected increase in public wages and the annual bonus. "But the world recession is expected to strip Egypt of at least 22 per cent of its sovereign revenues in 2009/2010," Nazif warned. "The national economy will suffer a loss in receipts of Suez Canal, tourism, exports and remittances of workers abroad. We will also suffer a loss between 11 per cent to 17 per cent in tax revenues because of recession and the market slowdown." In general, said Nazif, the new budget's revenues is expected to stand at a mere LE225 billion, compared to LE290 billion in 2008/ 09, while expenditure is targeted not to exceed LE322 billion, compared to LE341 billion in the current budget. "This big gap between revenues and expenditure will cause the budget deficit to hit 8.5 per cent of GDP, compared to an expected 6.9 per cent at the end of the current fiscal year on 30 July 2009," said Nazif, lamenting that the crisis came at a critical time, killing a long-run government hope of lowering the budget deficit to at least five per cent.
