THE Government of Prime Minister Ahmed Nazif must be closely following the desperate measures being taken in Greece to help this EU member state reduce its alarming budget deficit. It would be a grave mistake if this unenviable Greek crisis were overlooked at home. The economic difficulties, which have swept violently across Greece appear to be the product of an ever-increasing and uncontrollable budget deficit, which, some reports say, is estimated at 12 per cent of GDP. According to unofficial estimates, the budget deficit in Egypt was between 6.5 and 7 per cent of GDPin fiscal year 2008-09. The global economic downturn in 2008 will have a negative impact in 2010, with a decline in exports, revenues from the Suez Canal and tourism. This should suggest that Egypt's budget deficit will increase alarmingly in the next fiscal year. However, key economists at home are optimistic that the Egyptian economy will survive, if the Government swiftly adopts a package of economic measures. The Government should immediately stop internal borrowing and look for safer alternatives. Lavish spending on luxury commodities and services should be reduced drastically. The Ministry of Finance estimated that the Government spent almost LE163.50 billion between July and December in FY 2008-09. The Ministry wants to reduce this to about LE152 billion in the corresponding period in FY 2009-10. Egyptians should also be persuaded to change their consumption habits. Although we should carefully learn the Greek lesson, we shouldn't swallow the Greek philosophy whole. For example, regardless of the fact that the imposition of property tax is a good idea for helping to narrow the budget deficit, imposing bigger taxes on individuals and investors would have an unfavourable impact on the domestic market and investments.
