The government's budget deficit in the 2012/2013 fiscal year hit new high of EGP 240bn, representing 13.8% of GDP, according to an official statement issued by the Ministry of Finance. This is a 43.9% increase from the 2011/2012 fiscal year's EGP 166.7bn deficit. Minister of Finance Ahmed Galal stressed that the government is committed to reducing the deficit to 9% of the GDP in the fiscal year that started July 1 as well as spurring growth to 4%, rather than the average 2.2%. The ministry attributed the rise in the deficit to high rates of government spending that contrasts with lower revenues, which remains depressed after years of political unrest and security problems that have crippled industries and driven away foreign investors and tourists. The government's total budget expenditure registered EGP 582.7bn, a 23.7% increase compared to the previous year's EGP 471bn. According to the finance ministry, 59% of this expenditure went to subsidised commodities and repayment of public debt. The financial report released by the ministry showed that public expenditure included EGP 141bn for wages and compensations, representing a 14.8% increase from the preceding year. It also included EGP 147bn that went to the repayment of interests of internal and foreign debts, growing EGP 42.5bn from 2011/2012 fiscal year. The cost of subsidised products increased by EGP 46.8bn, or 31%, compared to the year before. Petroleum subsidies climbed from EGP 95.5bn to EGP 120bn, a 25.6% increase, while other subsidised commodities also surged 5.6% to EGP 32.5bn.. The finance minister, during a press conference held last month, reiterated the ministry's intentions to "rationalise unjustified expenditure" such as energy subsidies and to continue with the smart card project. He forecasted that after implementing the first phase of the smartcard project, the government will save some EGP 3.5bn. Another major factor in the surge in expenditures was the public treasury's contribution to the pensions fund, which grew by 164.5% from EGP 6.2bn to EGP16.4bn. Minimal spending increases were also witnessed in education, after a 10.9% climb from EGP 56.5bn to EGP 65.5bn, and in the healthcare with a EGP 2.5bn increase to reach EGP 25.1bn. National income grew by EGP 41bn to register at 344.6bn in fiscal year 2012/2013 due to a 21% increase in tax income along with a 3% increase in non-tax revenues. Galal said that the government is keen to solve the budget imbalances through encouraging investments and with the assistance of the EGP 22.3bn stimulus plan. He added that the stimulus plan will support the growth of government investments from EGP 63.6bn to EGP 85.9bn. The finance minister also pointed out that the inherited financial and economic challenges such as the increase of public debt, high percentages of poverty along with the high rates of unemployment and the slow economic growth, all increase the necessity of a "financial discipline" policy for the government, saying that is "the optimal choice" for overcoming these challenges. The minister stated that the Gulf aid that Egypt received helped increase foreign reserves in the Central Bank of Egypt and stabilised the Egyptian pound against foreign currencies. Egyptian net international reserves have significantly increased, reaching $18.916bn at the end of August 2013, according to an official statement issued by the Central Bank on 5 September.
