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Egypt’s 2022/23 Budget: Controversy & Burdens

Egypt’s 2022/23 Budget: Controversy & Burdens

ArabFinance: The House of Representatives approved this week what is being deemed as Egypt’s largest general budget ever. But this comes amid a widespread controversy from members of parliament concerning the government’s borrowing plans in the fiscal year (FY) 2022/23. So is the government overspending or overborrowing?

Minister of Finance Mohamed Maait said on June 19 that the state’s general budget has exceeded EGP 3 trillion, becoming the largest of all time in Egypt’s history.

The budget for the new fiscal year reflects the government’s keenness to complete the development process and increase public spending to improve citizens’ lives, Maait said. He added that the allocated budget shall alleviate the burdens of the so-called imported inflation, so that the state could bear the burden on behalf of its citizens.

In order to set the budget, the House of Representatives had reconvened several times throughout this month to ensure that all recommendations are taken into consideration. Among the top recommendation that had been stressed on is for the government to restrict foreign borrowing.

The government had previously formed a committee to limit foreign borrowing only to funding the most crucial national development projects. But experts are arguing if anything concrete has actually been achieved on this front.

The government had to restructure the 2022/23 budget in accordance with the commodity price hikes the world is witnessing. Thus, it had decided to allocate more money to subsidies and social protection programs in order to mitigate their negative effect on the most vulnerable members of society, Maait said.

But this did not sit well with members of the parliament. The local press reported that members of the parliament had criticized the budget, referring to the excessive foreign borrowing in regard to the country’s debt level.

According to the latest figures by the Central Bank of Egypt, Egypt’s external debt recorded $145.5 billion at the end of December 2021, rising by around $7.7 billion as compared to end-June 2021.

The country, however, has settled debts of around $24 billion since the beginning of 2022, including $10 billion in external debts and $14 billion for foreign funds.

Representatives from various parties cited the lack of fiscal discipline and austerity measures, saying that “in Egypt, there is haphazard planning.”

According to Ahram Online, Diaaeddin Dawoud, a Nasserist MP, drew a comparison between the FY 2010/2011 budget and that of FY 2022/23. "In the FY 2010/11 budget, the cost of interest rate on loans reached EGP 85.1 billion, representing 21.2 percent of expenditure, while in FY 2022/23 the cost of interest rate on loans skyrocketed to EGP 960.1 billion, representing 33.3 percent of expenditure," said Dawoud, adding that "this means that this budget was drafted to serve creditors and not ordinary Egyptian citizens."

In response, Maait said that "drawing a comparison between the two budgets of 2010/11 and 2022/23 is not fair."

"In 2010/11, Egypt's population stood at 80 million, but now we are more than 100 million, and in 2010 we were suffering from power shortages everywhere, but now there is electricity everywhere, and in 2010 there was almost no natural gas, but now households in most of Egypt are connected to natural gas," Maait explained.

Meanwhile, Prime Minister Mostafa Madbouly revealed in a statement on June 15th that the Egyptian government will postpone any increase in electricity prices for six months, which will cost Egypt around EGP 10 billion. The move also comes as yet another attempt to alleviate burdens on citizens. 

The increase in the exchange rate of the US dollar to the Egyptian pound would have added EGP 4 billion to the annual estimated electricity cost of EGP 16 billion that Egypt already affords.

In an interview with CNBC on June 12th, Maait said that the elevated wheat prices to a record-high, coupled with pressures on the Egyptian pound, is expected to cost Egypt $3 billion in additional burdens.

This comes while the government had approved a two-year suspension of the law to ease financial burdens for farmers and stimulate them to increase agricultural production of strategic crops like wheat.

Moreover, the anticipated additional cost will include $1.5 billion in burdens to the general budget, while $1.5 billion will be shouldered by the private sector, Maait noted.

The minister noted that maintaining the oil price at $122 per barrel would cost the budget $7.2 billion.

Many contributing factors seem to weigh on Egypt's FY 2022/23 budget, which begs the question: Will the so-called largest-ever general budget accommodates Egypt's needs and alleviate the burdens? 

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