Six months in, is the state sticking to its budget?
 
 
Expenditure - Photograph: Isabel Esterman
 

The budget for this fiscal year was only approved by President Abdel Fattah al-Sisi on June 30, after he sent it back to the Cabinet demanding that the deficit be lowered to 10 percent. It was one of his first acts as president since the budget was finalized, as attention was focused on the election. 

Followed immediately by a slew of tax and subsidy reforms and a sudden increase in fuel prices, a review of the 2014/15 budget revealed few major differences between this budget and government spending in the prior year

Now that half the fiscal year is over, we look at how well the government is doing at sticking to the budget.

Thermometer graphs

Spending and revenue are both below the halfway point. But the deficit has already exceeded 50 percent, because government spending is still outpacing revenue.

Of course, different payments to and from the government happen at different times of year. For example, employers aren’t responsible for filing tax returns for the second quarter until the end of January, so the government could see a bump in revenue after the cut-off in reporting. Likewise, major payouts are scheduled throughout the year, such as the US$700 million Egypt had to repay to the Paris Club in January. So these ratios could change pretty quickly.

With that in mind, comparing Egypt’s performance from July-December of the 2014/15 fiscal year to the same months last year can give a better sense of how the government is doing. Egypt closed the 2013/14 financial year with a deficit of LE252 billion, around 12 percent of gross domestic product (GDP).

Revenue graph

The figure that really stands out here is the steep drop in grants after the boom in aid from the Arab Gulf in autumn 2013. An increase in non-tax revenue — which includes things like Suez Canal tolls, as well as dividends from state-owned companies — and tax revenue has not been enough to balance out the drop.

Also worth noting is that Egypt has so far seen little effect from new taxes, such as the real estate and capital gains tax. At LE55.3 billion, taxes on goods and services make up nearly half of tax revenue. Collection grew by nearly a third, around LE14 billion, accounting for the bulk of year-on-year growth. By contrast, taxes on income, capital gains and profits declined by 13.9 percent to reach LE39.3 billion. It should be noted that much of this is due to the fact that the government has still not settled its accounts with the state oil company.

Expenditure

Spending is up across the board, except for subsidies. However, since the Finance Ministry has not yet paid its energy subsidy bill, the numbers are a bit misleading. Fuel subsidy cuts and low global oil prices should help keep that bill down, but it’s too early to judge what the final total will be. All other spending under the category of “subsidies/grants/social benefits” went up, including subsidies to the General Authority for Supply Commodities (GASC), which procures grain for subsidized bread.

So far this fiscal year, the government is bringing in less money and spending more overall than it did in the same period a year earlier. Unless this pattern changes, it will be tough for the government to meet its goal of narrowing the deficit.

This content was produced in partnership with the Rosa Luxemburg Foundation.

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Isabel Esterman 
 
 

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