Egypt ruling military approves tightening in spending in 2011/12 budget

State spending shrinks to LE491 million and minimum wage is reduced to LE684 from the LE700 pledged, reveals the final version of the Budget

The modified budget has been approved by Egypt's Supreme Council of Military Forces (SCAF) and includes spending cuts of LE39 billion, alongside an increase of LE2.5bn in revenues, bringing the deficit down by LE36.5bn.

This represents a 7.43 per cent cut in spending compared to the original draft.

The interim government believes such fiscal tightening is necessary after the SCAF banned it from signing foreign debts.

The details of the cuts remain a secret. The Ministry of Finance website gives no detailed information on what items of spending have been abolished.

Ministers have only revealed reductions of LE3.5bn in energy subsidies, from a previous total of LE99.03bn. Unemployment benefit payments are also being halved, bringing their total budget burden to LE1bn.

Public investment was also cut by LE8.9bn, according to Ministry of Planning figures.

Egypt's military rulers have adopted the proposed budget for the 2011/12 fiscal year, two weeks after it was approved by the interim cabinet, said a statement from the Ministry of Finance on Monday.

According to the statement, state spending will be LE491bn, up 15 per cent on the current fiscal year, with 54 per cent devoted to social development. The government says it is committed to protecting low-income families from economic fluctuations, particularly the large recent hikes in world food prices.

The education sector is allocated LE52bn, a 10 per cent increase on the current fiscal year, while health provisions are up 17 per cent to LE23.9bn.

The housing sector and community facilities are a significant proportional increase, up 39 per cent to LE16.7bn.

A total of LE118bn has been allocated for social protection for workers and pensioners, up 22 per cent on the current fiscal year, says the statement.

The sum includes the long-awaited increase in minimum wages for state employees, despite being less than previously announced: LE684 per month instead of the promised LE700.

The increase will cost LE9bn and is set to benefit 2 million workers -- and 15 per cent in workers' bonus payments, costing LE3bn.

The largest increase in social spending comes via pension reform and a plan to increase pensions by 15 per cent as of April 2011. The
Treasury is set to bear the LE6.5bn cost of the hike which is said to benefit 8 million employees.

Pension contributions will also rise to 30 per cent with the former pension 'ceiling' of LE100 being lifted in a bid to help improve pensioner living standards. It will cost the government an annual LE2.8bn, bringing benefits to some 7.5 million Egyptians.

LE1.2bn has also been allocated to cover the cost of annually raising pensions.

But all these increases are less than those promised before the tightening measures which included scrapping a mooted raise in the minimum pension, according to the Al-Shorouk daily newspaper on Saturday.

The original version of the budget included an increase in minimum pension to LE300 instead of LE200, and doubling the pensions of the poor to LE200, in addition to other, small increases.

http://english.ahram.org.eg/NewsContent/3/12/15604/Business/Economy/Egypt-ruling-military-approves-tightening-in-spend.aspx

Ministry of Finance sets upper wage limit for government workers

Highest-paid government employees will earn a maximum of 36 times the salary of the lowest but bonus system leaves the door open for incentives

The Ministry of Finance has set its first ever upper wage limit for government employees.

A statement released by the ministry on Monday afternoon said the highest-paid government worker will now earn a maximum of 36 times the salary of the lowest.

The minimum monthly wage for current government employees is now set at LE708, including bonus payments, up from LE444 last year following the introduction of a minimum wage in July.

The new wage applies to 1.9 million working Egyptians, excluding public sector companies, public economic authorities (such as Railway Authority and State TV) and the private sector.

Under the new system, top-ranking government employees would take home a maximum of around LE25,000 per month.

But despite a pledge to set a limit on bonuses for the highest paid members of staff, the ministry's release gave no further details on restrictions, raising the possibility that diminished base pay may be bolstered by additional incentives.

A statement released on Monday afternoon unveiled a sliding system for payment of salaries for government workers, with longer-standing ones set to gain more than those who recently joined the payroll.

Employees who begin work with the government from July will earn LE684 per month, up from the previous starting wage of LE422.40.

The revision of Egypt's outdated minimum wage has been a controversial issue since long before the revolution.

In June the interim government announced a minimum wage of LE700 for state employees before the revised budget cut it to LE684.

The ministry has budgeted an initial LE9 billion to increase wages, according to its statement.

http://english.ahram.org.eg/NewsContent/3/12/16150/Business/Economy/Ministry-of-Finance-sets-upper-wage-limit-for-gove.aspx

A socially oriented budget: the most neglected demand of Egypt's revolution

Social justice was one of three foremost demands of the Egyptian revolution, yet the new budget is glaringly biased to the rich, prompting protesters to demand a redraft that addresses the country's glaring inequities

The people may want a new budget but it appears Egypt's military rulers and its government don't agree.

Prime Minister Essam Sharaf seems to have dismissed a key demand of the protesters on Tahrir Square, the writing of a new and poor-oriented budget.

"It is not possible to withdraw the budget or to have a new one," Abdel Fattah El-Gebali, advisor to the Minister of Finance, told Ahram Online, responding to demonstators' demands that the budget, recently approved by the Supreme Council for the Armed Forces (SCAF) and accused of being biased towards the rich, be replaced.

El-Gebali says he doesn't know of any official discussions concerning the abolishment of the current state budget, which came into effect on 1 July.

"There may only be some modifications on the budget as we go, depending on circumstances," he said.

On Sunday evening, Sharaf said there would be a ministerial reshuffle to exclude figures linked to the former regime from the cabinet.

The name of Samir Radwan, the current Minister of Finance who was a member of the policy committee of the National Democratic Party, was not on Sharaf's list, despite popular resentment against his recently approved budget.

When the SCAF blocked the interim government's plans to take on further foreign debt, the Ministry of Finance took the opportunity to cut public expenditure by a sum far higher than the loans it had requested.

The new draft of the budget aimed for a fiscal deficit of 8.6 per cent, instead of its previous 11 per cent target, giving the message that controlling the fiscal deficit -- one of the main recommendations of the IMF -- is more important than expanding social spending.

Wages, social spending and public investment saw the biggest cuts.

Non-transparent cuts

In what looked like an attempt to avoid criticism, just hours after it was published the Ministry of Finance withdrew a table on its website that showed the details of all the cuts in the modified draft of the budget.

The Ministry of Finance never kept its promise to Ahram Online to publish details of the budget changes, nor did the minister respond to repeated calls to disclose and comment on the modifications.

This lack of transparency has contributed to the anger of protesters on Cairo's Tahrir and other squares around the country, as widespread sit-ins enter their fourth day and gain further momentum.

Lists of demands announced by protesters on Saturday and Sunday included the abolition of the SCAF-certified budget, slammed by protesters as pro-rich, and the drafting of a new, socially driven one.

Little is known about how budget cuts will affect wages and pensions, social spending and public investment.

Cuts in all three would not only contradict promises of social justice, but also hinder Egypt's targeted growth rate of 3.5 per cent by suppressing local demand.

Unjust tax system

Another complaint is against the budget's plans for levying taxes. Egypt's lowest paid receive no tax breaks while no property or capital gains taxes are being levied on the rich.

The government dropped a previously announced tax break for those earning less than LE12,000 per year, according to a 'before and after' reading of the state budget as published on the Ministry of Finance website. This step would save LE3.197 billion, shows the first draft of the budget.

The original draft suggested raising the minimum taxable wage to LE12,000 ($2000) per year, up from LE9,000. But the government had to retreat later, in a step to trim public spending.

At the other end of the scale, taxes on the wealthy suggested in the original draft were also cancelled. By dropping property and capital gains taxes, the budget removed potential additional income of some LE2 billion.

Ahram Online has compiled a list of cuts on social spending:


The minimum wage was reduced to LE684 from LE700 and will not apply to employees without permanent contracts.
Pension reform was cancelled. Potential beneficiaries discovered the minimum pension would not be raised to LE300 per month as the Minister of Finance had promised.
A promise to raise monthly assistance to Egypt's poorest citizens to LE200 per month was also not honoured.
Unemployment assistance allocations were cut by half to LE1 billion.
Allocations for the medical treatment state fund were also cut by LE500 million compared to the original draft.



In addition, public investment was also cut by LE8.9 billion from its original LE55.9 billion total, according to unpublished data received by Ahram Online.

The data didn't provide any details on the cuts but they will include spending in education, housing and health, according to Ashraf El-Araby, advisor to the Minister of Planning.

The government will also abolish roads and bridges projects and reduce its annual target of 200,000 low-cost housing units, he adds.

"The original plan was too ambitious anyway. The originally planned investments were more than the economy had the ability to provide," says Abdel Fattah El-Gebali, defending the cuts.

Ashraf El-Araby explains that the government had to abolish public projects that were supposed to be financed through foreign debts and the budget deficit.

"Even after reductions, [public investment] will still be above previous year's level," he says.

The government is set to pour LE46 billion into the economy in 2011-12, against LE40 billion the previous fiscal year.

Al-Araby says the government will rely on the private sector to fill the LE8.9 billion gap and ensure the rate of growth doesn't fall under a predicted 3.5 per cent.

Many fiscal analysts are sceptical, asking why an expansionist budget is being rejected at a time when the risk-averse private sector will be wary of providing fresh investment.


http://english.ahram.org.eg/NewsContent/3/12/16115/Business/Economy/A-socially-oriented-budget-the-most-neglected-dema.aspx

I'm not satisfied :colbert:

The only thing I'm happy about is that we rejeted the IMF and World Bank loans. Those are disastrous. And I'd rather have these cuts than those loans.

well yeah, but I think it's justifiable. once people go back to work it should go up, if it didn't them yeah this is disgrace.

Egypt is on the way to collapse... Peoples demands is way too much... If you want to gain something higher, then you should start working... Bas kalam 2afl kanet el suez w thwrah kol esbo3, yb2a kda balad 7atedamar!!!

ye2fel kanat el suez eih? heya sayba?


On the other hand the people are not wrong either but the way they trying to solve the problem is wrong. I mean it's the same like people going to the high dam and say we going to overtake it. now lots of Egyptians will be out of electricity [not that it's perfect 24/7]. and some of those may actually disagree with the protests. ambohom homa eih?

but the high dam is not under the armed force so they went for the suez canal but what they don't know this will make things worse. it'll disturb the international relations and it may lead to awful scenarios :)


but again the people are right about protesting. Can you answer this question "where are heading today?" we simply have no plan for the future. the secracy that the armed force is used to keep as an armed force for security reason isn't something they should adapt today. we must have a clear plan for the next 3 months.

There has to be something from the prime minster that goes like, OKAY, from now to elections we have targets ... we are going to work on poverty, national security and we also are going to contribute in making a national project. and he should select the new government as part of his view or plans for the next 3 months.

meanwhile today, we have lots of problems and that's why you see one minster is doing something and the other doing other thing. and you also see the prime minster doing something today and totally different thing tomorrow. there are just too many things and you can't work them all. you need to concentrate on certain things. the whole government has toward this targets to make it reality.

you can't have the housing minster, trying to provide homes for slums and solving these problems while you have your energy and electricity minster trying to export gas to israel :nuts: they have to have priority, I'm not say don't help the economy by making these deals but you also should contribute and say okay, since slums is our priority I'm going to think about them first. I mean the guy is doing good thing, we're not saying they are bad, but they are not working as part of a team that have one target.