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Future budgeting
Published in Al-Ahram Weekly on 25 - 05 - 2006

The People's Assembly and Shura Council are heatedly debating the state's 2006/2007 budget and development plan. Gamal Essam El-Din listens in
The first budget announced by Prime Minister Ahmed Nazif's new government is currently the topic of hot debates in the People's Assembly and Shura Council. Finance Minister Youssef Boutros Ghali, addressing parliament on 14 May said the 2006/ 2007 budget charts long-term objectives and far- reaching reforms in order to achieve economic stability and higher employment levels. "These objectives and reforms," said Ghali, "are primarily contained in President Hosni Mubarak's presidential election programme."
Ghali said the new budget will increase public spending by 27.7 per cent, up from LE214.7 billion in the last fiscal year, to LE274.2 billion. With the current fiscal year's revenues estimated at LE163.9 billion -- which is an increase over the LE130.2 billion of 2005/2006 -- the budget deficit for this year will decrease by 1.7 per cent. It will go down from LE57.7 billion in 2005/2006, which is 9.7 per cent of Gross Domestic Product (GDP), to LE53.4 billion, or eight per cent of the GDP. Ghali added that the overall budget deficit -- the figure including foreign and local debt payments -- will stand at 62.2 billion, or 9.4 per cent of GDP. A recent IMF mission had criticised the government for doing little to slash the budget deficit and public debts. The IMF mission had warned that unless seriously addressed, the deficit problem could expand to unprecedented levels.
According to Ghali, the unprecedented projected expenditure will be financed mainly through autonomous financial resources. These include taxes, customs, grants, revenues of the Suez Canal, the Egyptian General Petroleum Corporation (EGPC) and the Central Bank of Egypt (CBE). The minister said tax revenues in 2006/2007 are expected to increase by 29.5 per cent. This means that they will rise from LE81.6 billion in 2005/2006 to LE105.6 in the current fiscal year. The finance minister also asserted that the proceeds of foreign grants are expected to increase by 21.7 per cent. They would thus rise from LE2.9 billion in 2005/ 2006 to LE3.5 billion in the new fiscal year. Other revenues accrued from the Suez Canal, EGPC and CBE, are estimated to increase by 19.9 per cent in 2006/2007, rising from LE45.7 billion in 2005/ 2006 to LE54.8 billion in the new fiscal year.
Public expenditure in the new fiscal year 2006/ 2007 aims to cover the costs of six objectives. These include raising salaries, buying goods and services, paying local and foreign debt servicing costs, covering subsidies and strengthening the state's social roles. They also comprise funding development investments and meeting other expenses. In terms of the first objective, Ghali said, the government is dedicated to raising the salaries of state employees. "There will be an increase by 12.2 per cent in salaries, from LE45.8 billion in 2005/2006 to LE51.4 billion in 2006/2007," the minister said. He added that the objective of raising salaries alone will account for 18.8 per cent of the budget's public expenditure. Buying goods and services will account for 5.6 per cent of the new budget's public expenditure. This will be LE15.5 billion, up from LE13.1 billion in the last fiscal year. Ghali explained that the costs of debt servicing will rise in 2006/2007. They will reach LE50.7 billion, up from LE42.6 billion in 2005/ 2006. This third objective, according to Ghali, accounts for 18.5 per cent of the new public expenditure of the budget. The fourth objective, which is financing subsidies and strengthening the state's social roles, has entailed the allocation of a whopping LE58.4 billion, which accounts for 21.3 per cent of total public expenditure. The figure, which exceeds by LE8 billion the sum earmarked for this purpose in the 2005/2006's budget, will be going to the most needy, according to the minister. Subsidies extended in this context will mainly cover supply commodities such as bread, sugar and food oil. They will also support oil products, agriculture production, transport, drugs and health insurance, soft-term loans, low-cost housing and industrial communities. The fifth and six objectives which are constituted of funding development investments and meeting other expenses -- will account for 15 per cent of public expenditure. This is LE41.1 billion, up from LE35.6 billion in 2005/ 2006.
Ghali explained that the new budget is the first step towards realising President Mubarak's presidential election programme's objectives. The latter aims to generate, within a six-year period, some 4.5 million employment jobs, build 85,000 housing units for youth, construct 1,000 big and small factories, reclaim one million feddans and boost exports by 30 per cent. Part of the budget plan includes creating 280,000 jobs through the Social Development Fund and other agencies. "Besides," Ghali said, "the budget has also allocated LE200 million to help the state-run Industrial Development Organisation construct factories." The minister said that the growth in tourism traffic, coupled with the reclamation of more land and construction of new factories, will all help reduce the unemployment crisis.
Minister of Planning Othman Mohamed Othman commented that the 2006/2007's development plan -- the fifth in the 2002-2007 five-year development plan -- aims to raise the economy's growth rate to seven per cent, up from the current 6.1 per cent. This will necessitate that the government mobilise some LE135 million worth of investments, which is LE22 million over and above the investments of last year. "The government will be able to afford spending LE20 million -- or 15 per cent -- of total investments. Economic organisations and holding companies will provide LE19 billion, while the private sector can spend LE90 billion [76 per cent]." Othman expressed his certainty that the private sector will be able to achieve the targeted objective, especially given that its contribution is now approaching LE400 billion or 64 per cent of GDP.


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