Egypt’s New Budget to Boost Spending by 15%

Egypt’s Finance Ministry has submitted a draft budget to the cabinet that would increase spending by 15 percent in the year beginning on July 1.

Once approved by the army-appointed cabinet, the budget will be sent to the country’s newly elected parliament, where it is likely to face heated debate. Parliament, dominated by the Muslim Brotherhood’s Freedom and Justice Party, last month overwhelmingly rejected a cabinet plan to cut state spending.

The army is due to hand over power to a civilian president sometime before the new budget takes effect on July 1.

Under the draft budget, spending would be 516 billion Egyptian pounds and the deficit 170 billion pounds.

In March, the finance minister put the deficit for the current year at 144 billion pounds. Many economists believe the political and economic turmoil since last year’s uprising, which has eaten into revenue and increased demands for higher wages, could end up pushing the deficit much higher.

Egypt has asked to borrow $3.2 billion from the International Monetary Fund to help it plug next year’s deficit, but the IMF is insisting the government put together a program that reins in spending or comes up with new sources of revenue.

When it announced the 2011/12 budget in June, the government had put spending at 490.6 billion pounds, up 14.7 percent from the previous year.

Prime Minister Kamal al-Ganzouri told a news conference yesterday that in the five months since it was appointed, his government had shaved spending by 25 billion pounds in the current budget.

The draft 2012/13 budget allocates 126 billion pounds for wages, 25 billion for health and 60 billion pounds for education, al-Ahram quoted Finance Minister Mumtaz el-Saeed.