Egypt reins in planned spending in coming year
Cairo, June 23, 2011
Egypt's government tweaked its draft budget to cap an increase in state expenditure in the coming fiscal year after it withdrew plans for a tax on company dividends, figures indicated.
The government sees spending up 14.7 percent at 490.6 billion Egyptian pounds ($82.55 billion) in the 12 months starting in July, down from an estimate of 514.5 billion pounds given when a draft budget was shown to the press on June 1.
The budget, which follows the February overthrow of President Hosni Mubarak, increases spending to create more jobs and help the poor with extra subsidies on essential goods as the interim government tries to keep a lid on social tensions ahead of planned elections later this year.
Finance Minister Samir Radwan told Reuters on June 9 that he had dropped plans to levy a tax on share dividends and was looking for ways to cut planned expenditure as a result.
Businessmen and investors had voiced strong opposition to the new dividend tax. The decision to cap planned spending is "nothing to do with the IMF. It's a purely Egyptian decision," Radwan said on Wednesday.
The International Monetary Fund agreed to a $3 billion, 12-month standby finance arrangement for Egypt this month.
The government hopes the IMF deal will pave the way for billions of dollars more from donors such as the World Bank, Saudi Arabia and Qatar.
The finance ministry's statement said it expected a 2011/12 budget deficit of 8.6 percent of gross domestic product, versus an estimated 9.5 percent in the 2010/11 fiscal year. Economists have been more pessimistic, forecasting a deficit above 10 percent of GDP in the coming year.
Egypt's economy fell into recession after the uprising that toppled Mubarak, as vital sources of foreign exchange including tourism and foreign investment collapsed.
Real gross domestic product contracted by 4.2 percent in the fiscal third quarter from January to March, its first year-on-year contraction since Egypt's first release of quarterly GDP data in 2001/02.
Radwan told reporters on Wednesday the government was still in negotiations to receive financial aid from Gulf countries, the European Union and the United States totalling some 14.3 billion Egyptian pounds ($2.41 billion).
"I have met today with the GCC (Gulf Cooperation Council states) and I am hoping to receive it in any form, be it aid or a donation from the GCC, the EU and the US, but we are still in discussions," Radwan told reporters. - Reuters