Egypt's budget deficit is expected to register between 11% and 12% of GDP by the end of the 2013/2014 fiscal year (FY), Minister of Finance Hany Kadry Dimian announced Wednesday, contradicting figures quoted by the former government Dimian said the previous expectations were built on plans and assumptions that are not yet fully implemented. Former interim finance minister Ahmed Galal had predicted a deficit of 14% of GDP in FY 2012/2013, to be reduced to 10% by the end of FY 2013/2014, with a GDP growth rate of 3%. "As a result of the current exceptional situation the country witnessed over the past months, the growth rate is expected to record from 2% to 2.5% of GDP," Dimian said. However, in 2014/2015, the budget deficit is expected to register between 10 to 10.5% of GDP, the minister added. During the conference, Dimian said the current energy subsidies system will not continue "in the current form". "People are now aware of the negative effect of the energy subsidies programme," Dimian said. "A total amount of EGP 1tn were spent on the system since adopting it, however, living conditions haven't been improved." The government is considering restructuring the energy subsidies programme. In reducing the quantities distributed to beneficiaries, the reduction rate will be determined according to the usage rate, Dimian said, stressing that the middle class will not be harmed by the process. Dimian revealed an initiative to reduce the government's fuel and natural gas usage by depending on solar energy to meet the finance ministry's power needs, and also is also considering using natural gas to fuel government cars and buses. Discussing the wages system, Dimian said that his ministry is considering stopping wage increases. "During the 2009/2010 fiscal year, wages and compensations stood at EGP 80bn in the state's budget," he said. "Meanwhile, it currently occupies around EGP 185bn in the budget." He attributed the increase to the "public pressure" on the previous governments. "It's the time for workers to stop making demands and start working," he said. Dimian said his ministry will adopt a "balanced" economic policy rather than the expansionary fiscal policy adopted by Galal, as "there is no room for more deficits in the budget and the internal debt." There will be "serious measures" that will affect everyone except poor and low-income individuals, Dimian added. "We will not depend on financial assistance from other countries to revitalise the economy; instead people should build the economy themselves," Dimian said. "We are between two choices: to bear the burden, or bequeath it to the next generation." "This will take a lot of time and effort and we will face confrontations with many sectors in society, but we are ready for that," the minister said. The ministry will focus on increasing the employment rate and strengthening the social safety net, Dimian said. The minister added that he would consider a draft law, prepared by the former finance minister, that imposes a 5% income tax on "high-income" individuals. "This is a temporary tax law that will last for only two or three years," he said, noting that it will be submitted to the cabinet in the coming weeks.
