arab republic of egypt · task) can only come from allah. in him i trust, and unto him i look"...
TRANSCRIPT
Arab Republic of Egypt
Ministry of Finance
Financial Statement on
The Draft State’s General Budget for the Fiscal Year 2010/2011
Presented by:
Dr. Youssef Boutros Ghali
Minister of Finance
2010
2
Table of Contents for the Draft State’s General Budget for the Fiscal Year 2010/2011
Page Number
Introduction 7 Chapter One: Performance of the global and domestic economy in the light of the remission of the global financial crisis
11
I- Development of the global economic performance and policies for facing the international financial crisis
11
II- Development of the performance of the Egyptian economy and the recovery from the impacts of the global crisis
16
Chapter Two: Financial policy strategy and the requirements for the future stage
21
I- The general framework of the financial policy 21 II- The future vision of the State’s General Budget: the financial
path until the fiscal year 2014/2015 24
Chapter Three: The expected results and strategic goals of the current stage
30
I- The expected results for the performance of the General Budget and public debt in the fiscal year 2009/2010
30
II- Position of the Domestic and Foreign Public Debt 33 III- The main components of the draft General Budget for the
fiscal year 2010/2011 34
IV- Social dimension as an anchor of the budget within the framework of implementation of the directives of the President of the Republic
40
Chapter Four: The bases for estimates of uses and resources of the draft State’s General Budget for the fiscal year 2010/2011
45
I- The gross primary estimates of the draft State’s General Budget
47
II- The detailed estimates of the public expenditures of the draft State’s General Budget
56
III- The detailed estimates of the public revenues of the draft State’s General Budget
78
Chapter Five: The key financial balances of the draft State’s General Budget for the fiscal year 2010/2011
90
I- The budgetary cash deficit 91 II- Net acquisition of financial assets 91 III- Overall budget deficit 92 IV- Measures for financing the overall budget deficit 93
3
V- Position of the Domestic and Foreign Public Debt 94 Chapter Six: The draft budget of the Public Treasury for the fiscal year 2010/2011
99
Chapter Seven: The draft budget for the fiscal year 2010/2011 in accordance with the gender-responsive program and performance budget
102
Conclusion 104
4
List of Tables
Content Table Number
Page Number
Distribution of the First Fiscal Stimulus on the Different Sectors in FY 2008/2009
1 19
The Third Fiscal Stimulus Distributed on the Different Sectors in FY 2009/2010
2
20
The Current Situation for the Medium-Term Budget Estimates in light of the Implementation of the Proposed Procedures
3
26
Development of Growth Rates and the Fiscal Space in light of Proposed Measures
4
28
Expected Financial Performance for FY 2009/2010
5
31
Development of Net Public Debt of General Budget Entities
6
34
Appropriations of Social Dimension
7
42
Key Indicators and Assumptions
8
46
Uses & Resources of the State's General Budget
9
48
Expenditures and Revenues
10
49
Expenditures
11
51
Acquisition of Financial Assets
12
52
The Payment of Domestic and Foreign Loan Installments
13
52
Public Revenues
14
54
Wages and Compensation of Employees
15
58
Purchase of Goods and Services
16
59
Interests
17
63
Subsidies, Grants, and Social Benefits
18
66
G.A.S.C Subsidies in Draft Budget of FY 2010/2011
19
67
Petroleum Products Subsidies in Draft Budget of 2010/2011
20
68
Purchase of Non-Financial Assets, "Investments
21
74
5
Content Table Number
Page Number
Investments' Major Components
22
75
Functional Classification of Budget Expenditures according to the State's Activities
23
77
Expenditures by Functional Classification of the Draft Budget of FY 2010/2011
24
77
Public Revenues
25
78
Development of Tax Revenues
26
80
Components of Tax Revenues according to the Classification of the Revenues Authorities
27
81
General Taxes
28
82
General Sales Tax
29
84
Taxes and Customs Duties
30
85
Other Tax Revenues
31
87
Other Revenues
32
89
Net Acquisition of Financial Assets
33
92
Overall Deficit
34
93
Net Borrowing & Financing Sources
35
94
Development of Net Public Debt
36
95
Development of Domestic & Foreign Public Debt
37
97
Public Treasury Budget: Summary of Budget Sector Operations
38
100
Public Treasury Budget Overall: Results of the State General Budget
39
101
Entities whose Allocations were Distributed according to Performance and Programs Budget
40
103
6
List of Figures
Content Figure Number
Page Number
Development of world prices for some basic commodities 1 14 Quarterly Developments in Real GDP Growth Rates (year-on-year)
2
17
Development of Gross Real GDP from 2004/2005-2010/2011
3
17
Budget Deficit in the Medium-Term in light of Proposed Reforms
4
24
Budget Entities Debt in the Medium-Term in light of Proposed Reforms
5
25
Expected Growth Rates when Implementing the Proposed Measures
6
27
Development of Fiscal Space Available in light of Implementing the Proposed Measures
7
28
7
"In the name of God, the most Merciful, the most Beneficent" "I only desire (your) betterment to the best of my power; and my success (in my task) can only come from Allah. In Him I trust, and unto Him I look" True Are the Words of God Mr. Speaker of the People's Assembly Ladies and Gentlemen, Members of the Esteemed Assembly It is my pleasure to inform you that the Ministry of Finance (MOF) has submitted to your esteemed Assembly a draft of the State’s General Budget for the fiscal year (FY) 2010/2011, corresponding to the fourth year of the five-year plan for economic and social development (2007/2008-2011/2012). I submit the draft of the State’s General Budget for the constructive and fruitful discussions with the Plan and Budget Committee and Ad Hoc Committees, in preparation for the discussions at your prestigious Assembly. It is my pleasure to submit to you, and to the honorable Members of the Assembly, the Financial Statement on the draft State’s General Budget for the FY 2010/2011, for the sixth consecutive year. The Financial Statement includes the financial policies and the main components of the submitted draft budget, under the framework of completing the electoral program of the President of the Republic, as well as its goals of achieving social justice, protection of low-income people, and the provision of firm rules necessary for economic and social development. The draft State’s General Budget for the FY 2010/2011 comes in light of the recovery from the impacts of the global financial crisis that hit as of mid-September 2008, with the relative disparity -of course- of the impacts of such a crisis on each country. The global financial crisis necessitated a comprehensive reevaluation of the global and domestic financial situation, as well as examination of the effects of such situations on the Egyptian economy and public finances. If we examine the effects of the crisis we will find that they are greater if assessed through the changes in the international trade movement, unemployment rates, living standards, reduction of world demand and the remarkable decline in the private investments. This is in addition to the restriction of credit needed for export and investment, and the reduction of saving rates, local investment and overall government spending. The effects of the crisis are felt more deeply through the aforementioned factors as opposed to through the decline in growth rates. There are two key issues that should be highlighted in this regard: I- Impacts of the crisis at the level of the global economy: The signs of recovery from the global crisis have appeared with the beginning the second half of 2009, creating a brighter current image and optimistic future prospects, especially with the materialization of the impacts of the new economic policies in tackling the global crisis risks and reducing its repercussions, whether regarding bailout plans, stimulus policies, or banking and financial controls' policies. In general, the world economy seems to be on its way out of the worst financial and
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economic crisis in the post-World War II era. Nevertheless, the recovery process from this crisis will be a gradual one, and it is possible- at least in the current stage- that this recovery will not be associated with new employment opportunities. There are still some concerns due to high unemployment rates, which necessitates that policy-makers uphold the highest degree of caution when making decisions. II- Impacts of the crisis at the level of the domestic economy: The impacts of the global crisis extended to the economies of different developed and developing countries. The global financial crisis was, in fact, a true test for the Egyptian economy, which was able to withstand the hurricane of this crisis despite its impacts on the Suez Canal, tourism and the Egyptian exports, as well as Arab and foreign investments in Egypt, and remittances of Egyptians working abroad, etc. Even with the decrease in the real growth of the Gross Domestic Product (GDP) to 4.7% in the FY 2008/2009, after it exceeded seven percent (7.2%) in the FY 2007/2008, this rate has surpassed the estimated decrease due to the impacts of the global financial crisis on Egypt, which was between 3% and 4.3%. Therefore, achieving a growth rate of 4.7% in the FY 2008/2009 reflected the resilience of the Egyptian economy in facing this crisis. The Egyptian economy also managed, in the first quarter of the FY 2009/2010, to achieve a growth rate of about 4.6%, which increased to 5.0% in the second quarter, resulting in an average growth rate of 4.8% for the first half of this FY. Efforts are being exerted to achieve a growth rate of 5.2% by the end of this FY. Also, the decline in private investment impacted the rates of development and the labor market in Egypt. The Egyptian government responded by injecting additional public investments and increasing subsidies by an additional EGP 15.5 bn. in the FY 2008/2009 and injecting extra investments of about EGP 10 bn. in FY 2009/2010 to provide for infrastructure requirements, especially drinking water and sanitation. Egypt, through its commitment to sound policies, was able to face the withdrawal of Arab and foreign investments during the FY 2008/2009 of about USD 10.5 bn. The impact on Egypt's foreign exchange reserves was minimal, due to the efficient use and management of Egypt's foreign exchange investments, which was the subject of praise by international financial institutions. In addition, Egyptian banks were not affected through their investments abroad, which were within the narrowest possible limits. It can be argued that Egypt has succeeded, during the first half of current FY 2009/2010, in re-attracting investments in the framework of the stability of the Egyptian market, even if the rates (net investment inflows and outflows) are still less than those of the corresponding period in the FY 2008/2009; the rates are much better than at the beginning of the global crisis. This esteemed Assembly had a strong role in supporting the Government counter the negative effects of the global financial crisis through its approval to open supplementary budgets, as follows:
• Opening a supplementary budget in the State's General Budget for the FY 2008/2009 of about EGP 13.5 bn. as a first package to activate and stimulate essential spending in the areas of drinking water and sanitation, localities projects, roads, bridges, hospitals, healthcare units and university
9
hospitals, the requirements for developing railways and Egyptian ports, as well as supporting Egyptian exports, activating the infrastructure of domestic trade and boosting industrial development, etc. Law No. 11 of 2009 has been issued in this regard. Amendments were made to custom tariffs by reducing some of their categories, thus helping to meet Egyptian production requirements and refunds were issued on sales taxes for capital goods for one year, until the end of December 2009.This was initiated with intention of reducing the costs borne by producers and encouraging the exportation and activation of the sale movement, which was estimated at EGP 2 bn., bringing the total value of the package to almost EGP 15.5 bn. • Opening a supplementary budget in the State's General Budget for the FY 2009/2010 of about EGP 10 bn. as an additional package to activate and stimulate essential spending in the areas of drinking water and sanitation, issuing Law No. 2 of 2010 in this regard.
With this procedure, the State targeted stimulating economic activity to minimize the repercussions of the global financial crisis and to replace the reduction in the private sector's investments with additional governmental investment expenditure and to compensate for the withdrawal of a significant portion of foreign direct investments (FDI) from the Egyptian market. In addition, some laws have been passed in the framework of the financial policy to support the State's role in serving the community, the most important of which:
* Law No. 10 of 2009 on Organization of Supervision over Markets and Non-banking Financial Instruments; * Law No. 14 of 2009 on the amendment of some provisions of the Law Concerning Regulation of Bids and Tenders, promulgated by Law No. 89 of 1998; * Law No. 130 of 2009 on the amendment of some provisions of the Social Insurance Law, which was promulgated by Law No. 79 of 1979; * Presidential Decree No. 51 of 2009 on the amendment of custom tariffs.
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Mr. Speaker of the People's Assembly, Ladies and Gentlemen, Members of the Esteemed Assembly
The General Budget is considered the financial program for implementing the State's plan and the most important instrument of the financial policy to affect the State's general economic and social trend. The current stage is of paramount importance as it expresses the governmental programs and policies for achieving the presidential program "crossing towards the future." Accordingly, in the framework of the transparency necessary to submit the State’s General Budget to your esteemed Assembly, and for the sake of the circulation of visions and enrichment of the debate on the budget, it is my pleasure to introduce to you the Financial Statement for the draft State’s General Budget for the fiscal year 2010/2011 through the following key chapters: * Chapter One: The performance of the global and domestic economy in light of the recession of the global financial crisis.
* Chapter Two: Financial policy strategy and the requirements for the future stage, which includes:
I- The general framework of the financial policy; II- The future vision of the State’s General Budget: the financial path until the
fiscal year 2014/2015. * Chapter Three: The expected results and strategic goals of the current stage, which include:
I- The expected results for the performance of the General Budget in the fiscal year 2009/2010;
II- Position of the Domestic and Foreign Public Debt; III- The main components of the draft General Budget for the fiscal year
2010/2011; IV- Social dimension as an anchor of the budget within the framework of
carrying out the directives of the President.
* Chapter Four: The bases for estimates of uses and resources of the draft State’s General Budget for the fiscal year 2010/2011, which handle the following:
I- The gross primary estimates of the draft State’s General Budget; II- The detailed estimates of the budget's public expenditures; III- The detailed estimates of the budget's public revenues.
* Chapter Five: The key financial balances of the draft State’s General Budget for the fiscal year 2010/2011. * Chapter Six: The draft budget of the Public Treasury for the fiscal year 2010/2011. * Chapter Seven: The draft budget for the fiscal year 2010/2011 in accordance with the gender-responsive program and performance budget.
* Conclusion.
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Chapter One Performance of the Global and Domestic Economy in Light of the Recession of the Global Financial Crisis Mr. Speaker of the People's Assembly, Ladies and Gentlemen, Members of the Esteemed Assembly, It is my pleasure to present to you the performance of the global economy in light of the global crisis and the crisis management undertaken through the implementation of exceptional policies, which targeted overcoming this crisis and neutralizing its impacts. It is also my pleasure to present to your esteemed Assembly the performance of the Egyptian economy during this crisis, and the policies that helped deter the serious impacts of the crisis, in addition to the present and future vision of our economy in light of the diminishing effects of the crisis. UI- Development of global economic performance and policies for facing the global crisis The world economy has recently undergone a cautious recovery from the worst global financial crisis in 80 years. Global economic growth rates returned to positive levels after a period of stagnation ,although differing from one region to another and from one country to another within the same region. The International Monetary Fund (IMF) staff forecasts an increase in world growth rates to reach 4.1% in 2010 and 4.3% in 2011, against a negative growth rate of 0.6% in 2009. These estimates are higher than the previous IMF forecasts last January and October, indicating improving rates of recovery over time. In spite of these positive developments, the global economy has not yet returned to the same level of activity as the pre-crisis stage, where the global economy achieved a growth rate of 5.2% in 2007. In addition, these positive indicators still face several major challenges, whether they are in the labor market or in the financial and economic imbalances in some major countries and among different economic regions. All parties seek to achieve tangible progress in developing supervisory frameworks on financial markets and various financial instruments, which were a major cause of the aggravation of the crisis worldwide to begin with. World trade indicators began moving in the direction of positive growth rates. The global trade volume of goods and services is expected to reach rates as high as 6.7% in 2010 and 6.2 in 2011, after shrinking to 10.9% in 2009. It is projected that trade growth rates in the developed countries rise to 5.2% in 2010 and 5% in 2011, compared to shrinking to 12.2% in 2009. Meanwhile, trade will achieve faster growth rates in the emerging and developing countries, amounting to 8.9% in 2010 and 8% in 2011, compared to 8.8% in 2009. The improvements in the performance of a large portion of the global economy are due to the financial and monetary packages, as well as the exceptional procedures, which were implemented by most countries during the past eighteen months. Packages and policies differed from one country to another in accordance with each
12
country’s financial situation and the extent of being impacted by the global crisis. Some packages included programs for financial expenditure to support specific sectors, especially the building and construction sectors, while other countries implemented financial programs to support the financial sector, which was seriously affected by the global crisis. Many countries adopted expansionary monetary policies, which depended upon reducing the interest rates to their lowest possible levels in order to accelerate lending and economic activity, as well as maintain employment levels. These programs succeeded in coordinating economic policies among countries and activating of the role played by international financial institutions, mainly the IMF and the World Bank. Coupled with the role of regional development banks, these factors succeeded to a large extent in stimulating world demand and causing growth in the lending rates for companies and the family sector. This happened particularly after assuring the consumers and investors of the governments' abilities to properly and promptly intervene, as well as their abilities to control the negative effects of the global crisis and reduce its aggravation. The world production and trade rates resumed positive growth rates during the second half of 2009, accompanied by a shift in the inventory cycle. Moreover, the confidence indicators of consumers, producers and investors have improved in world capital markets. This improvement remains linked, to a great extent in the major industrial countries, to programs and financial packages carried out by their governments. This raises concerns regarding the sustainability of the growth achieved by the global economy, if these countries begin gradually withdrawing from these special programs and returning to the usual fiscal and monetary policies, which are characterized by prudence and sustainability, before total reassurance that the risks of the global crisis have come to an end or have sharply diminished. There is no doubt that these programs and financial packages impose a heavy burden on states’ budgets. It is also inconceivable to keep applying them for a long time, especially with the general increase in the budget deficit and public debt rates in most developed and developing countries -except in some limited cases, such as Egypt and other emerging markets. We should also take into account the significant decrease in public revenues that has accompanied the global crisis in many of the developed countries and emerging markets. The public revenues of many developed countries and emerging markets were seriously affected by this crisis as a result of declining profits and consequently tax receipts, at a time when governments were committed to either maintaining the same level of spending or even involuntarily increasing it through the implementation of programs and financial packages. The fiscal imbalances in the major industrialized countries and many developing countries are expected to create new challenges for the world economy in the post-crisis stage. Different IMF departments forecast increasing inflationary pressures resulting from this situation. In addition, governments will compete with the private sector in obtaining the funding required for the procurement of their own investment requirements. Also, central banks will raise interest rates gradually over the medium-term compared to their current low levels, resulting in a higher cost of borrowing for the private sector and governments as well as a potential decline in investment rates and an increase of the burdens on public debt servicing.
13
The IMF also forecasts that inflation rates will stop increasing during the next stage due to the presence of idle productive capacities in many of the major economic centers, such as the European Union, thus strengthening the capacity of central banks in controlling inflationary projections. The IMF anticipates that inflation rates, as measured by consumer prices in the developed countries, will reach only 1.5% during 2010 and 2011, compared to 0.2% during the recession period in 2009. Inflation rates in the emerging and developing countries is predicted to reach around 5.7% and 4.7% in 2010 and 2011 respectively, compared to 5.2% in 2009, which are lower rates than the pre-crisis period. International studies and reports point to the continuous imbalances in the labor market and indicate that unemployment rates will remain at high levels in most countries during the coming period. The recovery of the labor market takes more time than the recovery of the overall economy, as the private sector mostly relies on existing and temporary employment prior to the provision of new permanent job opportunities, until there is assurance of sustainable stability in the growth rates of economic activity, the volume of corporate sales and their profits. Despite these negative outlooks, the optimistic view of overriding the crisis has been clearly reflected in the financial markets. Stock markets started to witness an increase since mid-2009, even prior to feeling the impact of financial packages and despite the fact that many advanced economies still have negative growth rates. This rejuvenation has led to a synchronized state of stability and expectancy in the financial sector, particularly the banking sector, after the intervention of governments to support this sector and prevent any further insolvency or deterioration of international banks, especially the major ones. Commodity markets have also rejuvenated, due to the gradual increase in world demand and the expectation that such a trend will continue, especially in the Asian emerging markets and the U.S. The world prices for some goods, such as oil, gold and edible oil, have started to pick up, while prices of other goods, such as wheat and corn, tended to go down relatively with the increase in world production. Sugar prices have witnessed an unusual leap during the first half of the current FY, before sharply decreasing in the third quarter, returning closer to their historical levels, after the increase in sugar cane production in light of rising world prices.
14
Figure (1): Development of World Prices for Some Basic Commodities
1/ Source: U.S. Energy Informations Association 2/ Source: World Bank- Chicago Board of Trade- Kansas Board of Trade 3/ Source: World Bank- Chicago Board of Trade 4/ Source: International Monetary Fund. It is noteworthy to mention that the projections for the prices of sugar were made before the significant decrease in prices that recently faced the markets.
Prices in the commodity markets are determined according to the characteristics of each separate market and are driven by their market fundamentals: supply and demand factors and the volume of their global stock. This is different from the previous wave of unprecedented rise in world commodity prices in 2007 until mid-2008, which witnessed collective constant mass upsurge and severe fluctuations in the prices of goods for a record-breaking long period of time, with the negative speculations that surrounded the U.S. economy and the dollar value.
4562 64
96
69 76
84
020406080
100120
Brent Crude Oil Prices (Dollar/barrel) 1/
143 154190
329
229190
200
050
100150200250300350Average Prices of U.S. Wheat (Dollar/tonne) 2/
97 104151
201 189
140 152
050
100150200250
U.S. Corn Prices (Dollar/tonne) 3/
194
273 272246
337
461 481
0100200300400500600
Sugar Prices (Dollar/tonne) 4/
15
Despite movements of oil prices in the range of USD 70-80 per barrel during most of the FY 2009/2010, projections and transactions in the future market refer to the possibility of continuous fluctuations in oil prices within the range of USD 80-85 per barrel during the next FY. Despite the relative recovery of the global economy, there are still many major challenges which cannot be disregarded, including:
• Continued global imbalances, which played a role in causing the global crisis and thus require rigorous efforts to increase domestic demand and consumption in countries that have achieved high surpluses in their saving rates and in the balances of their foreign transactions, such as China and some other Asian countries. Continued global imbalances further necessitate simultaneous efforts to increase saving rates and reduce consumer spending in the countries that suffer from a structural deficit in their saving rates and in the balances of their foreign transactions, like the U.S. Such a relationship should be reflected in the value of the currencies of these countries.
• Expecting a large increase of capital inflows into the emerging and developing countries during the coming period, with the increased possibility of using them to meet the liquidity needs of investors when needed. This requires prudential policies to deal with these flows, so as not to affect the stability of these economies and their exchange rates, or the incidence of unjustifiable rises or new "bubbles" in the prices of assets.
• Cautious phasing-out of programs, financial packages and expansionary monetary policies, aiming to minimize any negative effects on investor and consumer confidence, in the ability of the economy to stabilize without these programs and packages, and without affecting rates of economic growth. This requires a gradual transfer of the sources of growth from reliance on government demand to the family and private sectors.
• In light of the increasing levels of the general budget deficit and public debt in most countries, it will be imperative that some of these countries take further actions, regarding both their revenues and expenditures, to reduce the deficits in their general budgets in order to achieve financial stability domestically and for the global economy over the medium and long terms.
16
UII- Development of the performance of the Egyptian economy and the initial stages of recovery from the impacts of the global crisis The Egyptian economy has managed to achieve increasing growth rates since 2004/2005, averaging between 4.5% and 7% during the fiscal years 2005/2006-2007/2008. These increasing growth rates came in light of implementing a number of core structural reforms, whether in tax regulations or in laws governing the investment, trade and business climate, and as a result of adopting prudent and consistent economic and financial policies, which led to restoring confidence in the Egyptian economy and its ability to grow over the medium and long terms. These policies resulted in collectively achieving increasing growth rates until the period just before the global crisis. The sources of this growth were various and diversified to a significant extent, not concentrated in one or two sectors, and included many of the goods and services sectors (such as manufacturing industries, trade, construction, communications, tourism, oil and agriculture, etc.). This diversification led to a remarkable degree of stability in the performance of Egyptian economy during the global crisis which ranked the Egyptian economy among the fastest growing economies on the global level during the crisis. Many international institutions praised the performance of the Egyptian economy and the ability of fiscal policy to absorb the impacts of such a crisis. This is without prejudice to the financial balances related to indicators of total Domestic and Foreign Debt of the General Budget agencies, which settled at a rate of 80- 81%, down from almost 120% before 2005, despite the increase of the deficit to 8.4% as targeted figure for the FY 2009/2010 due to the adoption of expansionary financial policies to deal with the global crisis and reduce its deflationary impacts. The global financial crisis is considered the second crisis to hit the Egyptian economy, the first being the crisis of the increasing global prices of basic commodities and food in 2007/2008, which put pressures on the State’s budget at that time. Here, it is necessary to praise the attitude of the Egyptian Parliament in dealing with such emergency conditions and its prompt passing of laws, which were necessary to overcome these two crises. Actions taken included permitting the Government to increase appropriations for wages and subsidies to face the price crisis in 2007/2008, as well as taking actions on the side of revenues to ensure recirculation of profits realized during the years of prosperity to the interest of low-income people, and increasing allocations for investments through packages, amounting to a total of about EGP 25 bn., in order to support economic activity and domestic demand to face the recession that hit the world economy since late 2008. Performance of the Egyptian economy during the crisis Amid the clouds created by the global financial crisis and its deflationary effects ,the economic analyses and forecasts expected that the growth rate of the Egyptian economy would not exceed 4% at best. However, by the end of the third quarter of the FY 2008/2009, economic growth showed a positive improvement, reaching 4.3% and then rising up to 4.5% in the last quarter of the same year. The Egyptian economy achieved a growth rate of 4.7% for the FY 2008/2009, exceeding all projections and economic analyses.
17
On the other hand, economic growth rates in developing and emerging countries reached about 2.3% in 2009, according to the latest estimates of the IMF. Such results shed light on the high quality of growth that occurred in the Egyptian economy as a result of the diversity of the sources of such growth. Growth rates continued rising during the FY 2009/2010, reaching 4.6% in the first quarter and 5.1% in the second quarter. The average growth rate, during the first half of the current FY, reached about 4.8%, which reflects the return of the growth rate to its upward slope.
6.7
5.8
4.14.3
4.5 4.6
5.1
3
4
5
6
7
8
2007/2008 2008/2009 2008/2009 2008/2009 2008/2009 2009/2010 2009/2010
SecondFourth FirstThirdSecondFirstFourth
Figure (2): Quarterly Developments in Real GDP Growth Rates (year-on-year)
Source: Ministry of Economic Development
4.5
6.8 7.1 7.2
4.75.2
5.8
2
3
4
5
6
7
8
Expected Expected
Figure (3): Development of Gross Real GDP from 2004/2005-2010/2011
Source: Ministry of Economic Development
18
By observing the performance of the components of domestic demand, we find that government consumption and government investments are the elements that mainly maintained strong growth rates, exceeding their pre-crisis growth rates. The actual growth rate of government consumption reached 7.9% in 2008/2009, compared to 2.1% in 2007/2008, while the private consumption growth rate reached about 4.5% in 20082009, compared to5.7% in 2007/2008. Government investments achieved a growth rate of about 27% in 2008/2009, compared to 34% in 2007/2008. Financial Stimulus Packages injected by the government also helped establish public and private consumption as the primary engines of growth, with public and private consumer demand amounting to about 83% of total GDP in the first half of the FY of 2009/2010. The impact of injecting government investments was clearly reflected in stimulating real growth rates in many key sectors that helped boost economic activity and aided the Egyptian economy in overcoming the crisis. Regarding the second quarter of the current FY, seven key sectors contributed in generating a comprehensive growth rate exceeding 80%, namely: the manufacturing industry (13.7%); construction and building (12.7%); wholesale and retail trade (11.5%); communications (10.2%); tourism (10%); oil and mining (9.7%); and agriculture (8.8%). In view of these sectoral contributions, it is further highlighted that the diversity of the structure of the Egyptian economy is an asset that provides it with flexibility in dealing with fluctuations in the international environment. Egypt’s economic performance was not a mere coincidence; it was the result of measures and actions taken by the Egyptian Government to face the crisis through what is known as Financial Stimulus Packages, in addition to the economic and financial reforms adopted by the Government during the previous years. The first Financial Stimulus Package was introduced as early as the beginning of the FY 2008/2009, to preserve economic growth rates and employment as much as possible. This package aimed to stimulate domestic demand as a compensatory action for the decreased levels of foreign demand for Egyptian products and to promote investment opportunities. Such a package also accelerated the execution of several crucial infrastructure projects with high social value, such as drinking water and sewage. These projects will help with the recovery of the domestic economy once global demand rebounds. The first Financial Stimulus Package was activated by injecting nearly EGP 13.5 bn. in national infrastructure and public utilities projects, within the framework of the five-year plan, to be entirely financed from the State’s General Budget. The package also reduced custom duties and temporarily refunded sales taxes on capital goods, which amounted to a total of about EGP 2 bn. Your esteemed Assembly procured the necessary funding for these packages through ratifying the supplementary budgets provided for under Law No. 11 of 2009.
19
It was planned that financing the first Financial Stimulus Package would lead to the increase of the budget deficit from 6.9%, under the original budget, to 8%, under the revised budget. Nevertheless, the realized deficit did not deviate from the deficit targeted under the budget before the amendment, which was 6.9% of GDP. This is attributed to surpluses achieved in some expenditure items and some exceptional revenues acquired during the year. The Government was also keen to introduce a second Financial Stimulus Package, which amounted to EGP 7-8 bn. under the budget for the FY 2009/2010. This package included about EGP 4-5 bn. as additional investments, which exceeded the normal growth rates of investments during the period before the first Financial Stimulus
Sector L.E. million
Total Fiscal Stimulus to Generate Economic 15,532On the Expenditure Side 13,532
For the General Budget Sector 10,232Projects of Potable Water and Sanitation 7,030Roads and Bridges 1,000Projects of the Ministry of Local Development 1,000Projects of the Ministry of Health 400Ministry of Interior 200Ministry of State for Administrative Development 182University Hospitals 170Authority of Educational Buildings 150Fund of Court Buildings 50Waqf Authority 50
For Economic Authorities 600Egypt Railway Authority 400Development of the Red Sea and East Port Said Ports 200
Subsidy 2,700Promoting Exports 2,100Industrial Zones 400Infrastructure of In-house Trade 200
On the Revenues side 2,000Customs Tariff Reductions 1,500Temporary exemption from Sales Taxes on Capital Goods 500
Source: Ministry of Finance- Ministry of Economic Development
Table No. (1)Distribution of the First Fiscal Stimulus on the
Different Sectors in FY 2008/2009
20
Package. It also included an increase of about EGP 2 bn. in the allocations of the Export Support Program, bringing it up to almost EGP 4 bn. under the budget of the FY 2009/2010, with the objective of maintaining employment rates. In addition, about EGP 500 m. were allocated to develop the logistical areas that would in turn support the movement of internal trade, besides the completing the sales tax rebate on capital goods and customs duties reduction that was launched as part of the first package. Your honored Assembly has also approved the injection of more investments by the Government during the year 2009/2010, in addition to the abovementioned two packages, into some high-priority projects in the current five-year plan. These investments were in the areas of drinking water and sanitation, with a total cost of EGP 10 bn., representing a third Financial Stimulus Package implemented by economic authorities. Furthermore, the package serves as a catalyst for economic growth and for meeting the citizens' needs for drinking water and sanitation services.
The impacts of the global crisis on the global economy and on the movement of international trade started declining, and the Egyptian economy restored its upward trajectory, regarding growth rates and employment. It is expected that the Egyptian economy achieves a growth rate between 5.1%-5.2% in the current FY 2009/2010 and about 5.5%-5.8% during the next FY 2010/2011. It is now time to follow up on the implementation of the General Budget financial reform program and on further reducing debt rates. Our focus can be re-shifted to the program supported by your esteemed Assembly during pre-crisis years, whether through legislative reforms that have moved the system of economic legislation to new developed horizons, or through policies that may re-prioritize the public spending in a way that serves the broad base of citizens, or through specific effective procedures for rationalizing uses and increasing resources. The current financial policy strategy details and goals of the financial policy will be presented to your esteemed Assembly in the next chapter.
Sector L.E. million
Total Fiscal Stimulus to Generate Economic Activity 10,000On the Expenditure Side 10,000
Gross Government InvestmentProjects of Potable Water and Sanitation 8,500Roads and Bridges 200Projects of the Ministry of Local Development 650Others 650
Source: Ministry of Finance- Ministry of Economic Development
Table No. (2)The Third Fiscal Stimulus Distributed on the
Different Sectors in FY 2009/2010
21
Chapter Two Financial Policy Strategy and Requirements for the Next Stage Mr. Speaker of the People's Assembly, Ladies and Gentlemen, Members of the Esteemed Assembly, The Egyptian economy has started to rejuvenate after the relative decline of the impacts of the global crisis. The diversity of the Egyptian sources of growth, which were represented in the sectors of manufacturing industries, trade, construction, communications, tourism, and gas, etc., has strengthened the Egyptian economic stability. Nevertheless, there is no doubt that there will be a need to complete the implementation of structural and economic reform programs as well as the fiscal adjustment programs in order to maintain the pre-crisis gains of reform and to boost the progress of development. In light of the foregoing, it is appropriate to offer our financial strategy in the current and future stages through the following elements:
I- The general framework of the financial policy. II- The future vision of the State’s General Budget: the financial path until 2014/2015.
UI- The general framework of the financial policy The financial policy is based on three main axes, summarized by the following:
1. Stimulating economic activity and contributing to achieving high and sustainable growth rates in the Egyptian economy through the application of an integrated, investment-attractive, and business-attractive financial and tax system. Such a system would contribute to the prompt recovery of invested funds and provide the greatest possible economic surpluses to members of the community and its institutions, thus stimulating demand as a main engine of growth at the same time. 2. Stabilizing the sustainability of the financial situation of the General Budget and Public Debt, through increasing growth rates and generating increasing surpluses in the economy, along with developing the financial and tax system and even changing the face of the financial policy in Egypt. This can be done through developing Egypt’s institutions and resolving many chronic financial problems and entanglements that accumulated among state institutions over the decades. This axis is integrated with the importance of creating additional "Financial Space," which places additional resources at the disposal of the government to face potential crises or to increase social spending to fill the needed gaps, especially in disadvantaged areas, without affecting economic and financial balances, except in a very limited sense. 3. Gradually generating substantial financial resources that could be allocated to different aspects of social spending, such as health, education and improving the living conditions of citizens, through investing in infrastructure. This should be done without negatively impacting the overall financial balances, as well as avoiding creating burdens for future generations that would hinder their development goals.
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Recent world events have emphasized the need to protect the financial, economic and social policies against impacts that may result from the recurrence of such crises, and to take note of the measures undertaken to deal with the crises in case of future recurrence. This will require continued effort to build a strong and advanced economic and capital base on the one hand, and to create additional “Financial Space” in the General Budget on the other hand. This is to allow for dealing with these crises securely without affecting the current economic structure and securing it for future generations. The global economy has witnessed significant developments over the past two decades as a result of intertwined economic and financial relationships among countries and the remarkable development of financial instruments. This has coincided with increasing economic imbalances in the global economy as a result of structural and chronic saving gaps in some economic areas, versus a concentration of untapped wealth and savings in other areas, which contributed to unprecedented fluctuations in the value of major currencies, followed by fluctuations in the world prices of key commodities, such as food and energy. UThese developments have imposed a new dimension on the global financial policy, represented in the importance of hedging against future regional or global crises, which may have significant impacts on the path of emerging economies in particular, including Egypt U. The previously explained scenario took place in 2007/2008 and 2008/2009, when the Egyptian economy faced two crises. The first was the crisis of the unprecedented rise in world commodity prices and its substantial economic, social and political consequences; while the second was the collapse of capital markets and global economy, which led to the loss of trust in the entire international financial system. The consequences of these crises still exist, to a great extent, to this day, despite the relative improvement of economic indicators and projections for the performance of the global economy. The serious economic and financial structural reforms carried out by the Government since 2004, as well as the policies and procedures implemented by the Government to deal with both crises -each according to its nature- had a significant impact on helping the Egyptian economy avoid the serious consequences of such crisis. Various international institutions and sovereign rating agencies testify to the resilience of the Egyptian economy. The MOF’s vision can be summarized in the following:
• Implementing a package of integrated financial and tax policies for increasing national saving rates; • Distributing the burdens of generating the resources required for the state to as many productive economic sectors and realized incomes within the economy as possible; • Achieving sustainable stability of the State’s financial framework.
These objectives will increase the chances of achieving sustainable growth and boost the confidence of the domestic and international community in the ability of the Egyptian economy and the General Budget to face future crises. Therefore, investments may be expanded, in light of the existence of a safe economic entity characterized by low risks.
23
Over the past years, the government has initiated the process of developing a clear and integrated framework for a comprehensive financial policy reform program in order to gradually improve the fiscal performance, and reduce the budget deficit and the public debt to output ratio. Such a program would achieve financial sustainability and improve state revenues, and thus expand public spending in needed areas and raise their efficiency. These reformist actions included developing and updating a simplified, fair and investment-attractive tax system in Egypt to be in line with the best tax systems in the world. The first stages of this development began with the Income Tax Law No. 91 of 2005, the subsequent amendment of the Stamp Duty Law by issuing Law No. 143 of 2006, and the preliminary amendments to the General Sales Tax Law, which permit the so-called "refund of sales tax on capital goods" and amendments made on the custom tariffs to reduce their burdens and rectify their distortions while at the same time benefiting domestic production and increasing its competitiveness. These procedures had the greatest impact on reviving investments and domestic demand especially that most of these procedures dealt with reducing tax burdens, accelerating the recovery of funds to be refunded and increasing the turnover of capital, all of which are essential elements to improve the feasibility of investments. A package of important reforms related to managing State funds has also been implemented. It began with the application of Law No. 139 of 2006 on the Treasury Single Account and the subsequent development of the Government Payment System, by which all government financial transactions, including expenditures and revenues, are automated gradually. The Government Payment System had an important impact on the state financial framework and on the reducing the costs of government financial transactions. The government also implemented the electronic signature system as an essential procedure for automating government financial transactions. Moreover, the Public Debt Management System and Policy have been completely updated and automated, using the best and the most prevalent international systems. The principle of private sector participation in financing public investments has been deepened through adopting the system of private sector partnership, which is sponsored by the MOF through a draft law on regulating public private partnership (PPP) that was approved by the Shura Council and is being studied and debated by the committees of the People's Assembly. In case of approval, its provisions will be immediately enforced. The MOF had a role in affecting political leadership orientations towards decentralizing the management of state affairs by forming a decentralization committee that includes representatives of all concerned authorities as well as identifying its responsibilities through providing real space and a greater role to municipalities and making local councils in the governorates shoulder their responsibilities and assume good governance for strengthening people’s control. These financial reforms have succeeded in reducing the level of budget deficit from 9.6 % of GDP in 2004/2005 to 6.9% in 2008/2009. This entailed a reduction in the proportion of total debt due by the General Budget agencies from approximately 120% of GDP in 2004/2005 to an expected 80 %with the end of the FY 2009/2010.
24
These reforms also had a positive impact on rapidly increasing economic growth rates, to reach an annual average of 7% during the three years prior to the global financial crisis. Reform programs enabled the General Budget to bear the cost of the different financial stimulus packages that were injected during the financial crisis without affecting the financial balance of the General Budget and its stability indicators. UII- The future vision of the State’s General Budget: The financial path up to 2014/2015 In more than one occasion, your esteemed Assembly has shown special concern about the State’s General Budget deficit and the need to gradually reduce debt levels. All possible efforts have been exerted to achieve this objective, which fully conforms to the Government’s policies for implementing such an approach, despite domestic and foreign challenges. In this regard, your esteemed Assembly has passed laws necessary to enable state agencies to achieve this strategic goal, without prejudice to the priorities of pushing economic activity forward and maintaining a social dimension. In this regard, the MOF has developed an essential action plan to reduce the total public debt (domestic and foreign) rates of the state budget agencies, which include the central administration, municipalities’ local administration and service authorities, to about 55-60% of GDP by the end of 2014/2015. The action plan takes into account the declining impacts of the global financial crisis. This requires a set of inevitable actions to reduce the deficit rates in the State’s General Budget to about 3.5% in the same year.
6.98.3
7.36.7
4.84.0 3.5
1.8 2.31.1
1.9
0.1 -0.4 -0.6
-2
0
2
4
6
8
10
12
2008
/09
2009
/10
2010
/11
2011
/12
2012
/13
2013
/14
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/15
As a percent of GDP
(%)
Primary Deficit (Surplus)
Overall Deficit
Actu
al
Expe
cted
Figure (4): Budget Deficit in the Medium-Term in light of Proposed Reforms
25
These goals are considered the main objectives of the financial policy to achieve a sustainable financial situation and increase growth and development rates. These goals will undoubtedly require the attention and care of this esteemed Assembly to be achieved, through updating laws and legislations to keep pace with the requirements of the new stage of the Egyptian economy, as well as supporting the actions proposed to achieve sustainability of financial stability. The following are the reforms included in the proposed actions, in light of which reduced debt and deficit rates will be achieved:
1. Sales tax system reform and transition into the application of value-added tax.
2. Introducing some amendments to the Income Tax Law No. 91 of 2005, required by practical applications, including more technical clarification of some provisions.
3. Completing the development of the Treasury Single Account System in light of the results of actual applications of this significant system.
4. Maintaining the subsidy of butane gas and facing its leakage to non-targeted groups.
5. Finishing the automation project of government payments, including employees’ payroll.
6. Settling the complex financial disputes arising among various government entities.
7. Expanding partnership programs with the private sector. 8. Reforming the State pension system to become fairer for the beneficiaries by
raising the value of pensions, particularly low pensions, as well as allocating a basic pension for all those who do not receive a pension.
9. Other secondary or miscellaneous actions that aim at fiscal adjustment and stability and increasing resources.
UThe financial action plan of the State’s General Budget was adopted on the basis of achieving the following suppositions: Returning economic growth rates to the high levels achieved before the global crisis
81.1 80.2
87.4
63.0
57.5
51.3
43.740
45
50
55
60
65
70
75
80
85
90
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ual
2008
/09
Expe
cted
20
09/1
0
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/11
2011
/12
2012
/13
2013
/14
2014
/15
As a percent of GDP
Figure (5): Budget Entities Debt in the Medium-Term in light of Proposed Reforms
26
in order to reach 7.7% in the current business cycle. Assumptions also include: expecting investments along with commodity and services exports to resume rapid growth, which is reflected in the gradual increase of their ratio to GDP; non-exposure of world food prices to severe fluctuations as was the case in 2007/2008; the recent increase of global stock of some types of crops, such as wheat and maize; the stability of indicators of futures market at the time of preparing such estimates. We should also assume the stability of the global economy and advancement of its growth rates to 3.8% in FY 2014/2015, with the advancement of growth rates of the world commodity imports to 7.5% in the same year.
In this context, the urgency faced for developing education, health and infrastructure services as core elements for sustainable economic and social development is highlighted. This is in addition to the inherent role of the State in adopting and implementing the reforms required in these sectors, along with strengthening its social role in supporting some segments that have the least ability to benefit from the economic reform, thus contributing to more equitably distributing the fruits of economic growth to all categories of society. Achieving these objectives requires the provision of a large sum of additional financial resources, which are unavailable in
2008/2009 2009/2010 2010/2011 2011/2012 2012/2013 2013/2014 2014/2015
Actual Expected Draft Budget
Total Revenues 282,505 258,407 28,066 341,467 397,399 45,983 525,736Tax Revenues 163,222 171,335 197,274 248,423 300,726 349,795 408,027Grants 7,984 4,415 3,156 2,734 2,543 2,260 2,265Non-Tax Revenues 111,299 82,657 8,023 9,031 94,129 107,774 115,443
Total Expenditures 3,515 356,372 394,494 441,403 468,447 512,867 551,260Wages and Compensations of Employees 76,147 85,987 94,609 105,825 116,287 133,164 145,473
Purchase of Goods and 25,072 27,627 28,357 31,957 35,345 42,772 52,005Interests 5,281 71,066 90,629 7,858 87,542 95,779 107,765Subsidy, Grants and Social Benefits 127,033 95,172 115,916 141,068 131,807 125,488 109,855
Other Expenditures 27,007 28,162 31,125 36,486 42,337 48,918 57,059Purchase of non-financial Assets (Investments) 43,430 48,358 33,859 47,487 55,129 66,747 79,103
Fiscal space available for extra spending 2/ -- -- -- 6,000 15,000 30,900 61,400
Cash Deficit 68,995 97,965 113,834 105,936 86,048 83,937 86,925Net Acquisition of Financial Assets
2,831 733 -8,282 2,500 3,000 3,900 5,070
Overall Deficit 71,826 98,697 105,552 108,436 89,048 87,837 91,995Note: As a percent of GDP, unless otherwise indicatedGross Investments 4.2 4.0 2.5 3.0 3.0 3.0 3.0Tax Revenues 15.7 14.3 14.3 15.7 16.2 16.0 15.6Initial Deficit 1.8 2.3 1.1 1.9 0.1 -0.4 -0.6Overall Deficit 6.9 8.2 7.7 6.8 4.8 4.0 3.5Gross Debt of General Budget Entities 81.1 80.2 78.4 63.0 57.7 51.3 43.7
GDP (L.E. Million) 1,038,600 1,198,000 1,378,000 1,585,413 1,854,299 2,190,758 2,608,4711/ Reflects the trend of the medium-term General Budget in light of the implementation of the proposed reforms.2/ Fiscal space available for extra spending on social dimension and infrastructure.
Expected
(L.E. million unless otherwise indicated)
Table No. (3)The Current Situation for the Medium-Term Budget Estimates in light
of the Implementation of the Proposed Procedures 1/
27
such volume at this time, even with the implementation of the above mentioned proposed reforms. Proposed future measures not only lead to controlling the budget and public debt deficit, but also to the provision of a "financial space," which allows the State to increase spending on aspects pertaining to the social dimension and increase its ability to intervene to face internal and foreign crises, when necessary. The proposed measures would not only lead to increasing the “financial space,” as noted above, but also to significantly increasing economic growth rates and clarifying the path of this growth, compared to the expected situation in case of not implementing these measures. This improvement comes in light of the re-prioritization of governmental expenditure towards investment activities with higher economic and social returns, in addition to simulating those activities to attract more investments to various previously unattractive areas. The more confidence there is in the sustainability of financial stability as a result of eliminating a number of chronic financial entanglements, the broader the base of investors, many of whom are cautious. This will also result in raising employment rates, and consequently, raising the rates of domestic consumption, which all contribute to increasing growth rates.
5.8
6.8
7.5
8.1
8.5
4
4.5
5
5.5
6
6.5
7
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9
2010/2011 2011/2012 2012/2013 2013/2014 2014/2015
Figure (6): Expected Growth Rates when Implementing the Proposed Measures
28
It is proposed to direct the additional resources to serve the following activities:
1. Increasing educational and health allocations in the General Budget, and hence supporting and developing accumulated human capital.
2. Increasing the volume of public investments and maintaining them at 3% of the GDP yearly (on average), thus fulfilling urgent developmental requirements and pushing forward the wheel of economic growth.
3. Protecting the Egyptian economy against the risk of fluctuations in the global economic environment, as was the case in the previous two global crises.
Description 2011/2012 2012/2013 2013/2014 2014/2015 1/
Growth Rates by Implementation of the Proposed Procedures (%)
6.8 7.5 8.1 8.5
Fiscal Space by Implementation of the Proposed Procedures * Maximum 6 15 30.9 61.4 * Minimum 5.1 12.7 26.2 52.21/ This brings the debt to between 3-3.5%.
(L.E. billion)
Table No. (4)Development of Growth Rates and the Fiscal Space
in light of Proposed Measures
6.0
15.0
30.9
61.4
5.1
12.7
26.2
52.2
0
10
20
30
40
50
60
70
2011/2012 2012/2013 2013/2014 2014/2015
Figure (7): Development of Fiscal Space Available in light of Implementing the Proposed Measures
Expected Range for the Fiscal Space
29
4. Protecting low-income segments, supporting the groups that are most in need of subsidies and preventing non-target groups from having access to such subsidies.
5. Rectifying price distortions in energy prices, in order to maximize the return on the use of energy products and rationalize consumption, as well as raising the financial solvency of the system that manages the petroleum sector.
6. Reducing the public debt burden by to 44%-51% of GDP by 2014/2015.
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Chapter Three The Expected Results and Strategic Goals of the Current Stage Mr. Speaker of the People's Assembly, Ladies and Gentlemen, Members of the Esteemed Assembly, UI- The expected results for the performance of the General Budget and public debt in the current FY 2009/2010 It is important to review the financial performance of the current FY, the second year of the global financial crisis. This will help us to determine the challenges that we face and strengths we acquired to overcome this difficult stage. The following table shows the expected financial performance of the FY 2009/2010, compared to the budget estimates for that same year and compared to the previous years:
31
2006/2007 2007/2008 2008/2009 Budget Revised Budget Expected
Public Revenues1. Tax Revenues
- General taxes 66,089 75,910 89,362 71,883 71,883 93,143- Sales taxes 30,572 39,697 50,882 50,109 50,109 54,315- Customs 10,370 14,020 14,091 14,018 14,018 14,057- Other Tax Revenues 7,295 7,568 8,887 9,534 9,534 9,820
Total 114,326 137,195 163,222 145,544 145,544 171,3352. Grants 3,886 1,463 7,984 7,700 7,700 4,4153. Other Revenues
- Petroleum Surplus 11,014 25,282 21,637 10,802 10,802 20,232- Suez Canal Surplus 11,931 15,098 13,573 11,830 11,830 12,631- Other Economic Authorities 581 3,047 1,245 2,938 2,938 1,500
- Corporations Profits 2,222 2,648 3,894 5,609 5,609 4,902- Other Revenues 36,255 36,671 70,950 40,564 50,564 43,392
Total 62,003 82,746 111,299 71,743 81,743 82,657Total Public Revenues 180,215 221,404 282,505 224,987 234,987 258,407
Public Expenditures1. Wages and Compensation of Employees 52,153 62,839 76,147 87,484 87,484 85,987
2. Purchases of Goods & Services 17,028 18,470 25,072 27,349 27,349 27,627
3. Interests 47,700 50,528 52,810 71,066 71,066 71,0664. Subsidy, Grants and Social Benefits 58,442 92,371 127,033 73,480 73,480 95,172
5. Other Expenses 21,208 23,892 27,007 28,058 28,058 28,162
6. Purchase of non-Financial Assets, "Investments" 25,498 34,191 43,430 36,480 46,480 48,358
Total Public Expenditures 222,029 282,290 351,500 323,917 333,917 356,372Cash Deficit 41,815 60,886 68,995 98,930 98,930 97,964
Net Acquisition of Financial Assets 12,883 236 2,831 730 730 733
Overall Deficit 54,698 61,122 71,826 99,660 99,660 98,697Gross Domestic Product 744,800 895,500 1,038,600 1,181,000 1,181,000 1,198,000
Revenues as a percentage of GDP 24.2% 24.7% 27.2% 19.1% 19.9% 21.6%
Expenditures as a percentage of GDP 29.8% 31.5% 33.8% 27.4% 28.3% 29.7%
Cash Deficit as a percentage of GDP 5.6% 6.8% 6.6% 8.4% 8.4% 8.2%
Overall Deficit as a percentage of GDP 7.3% 6.8% 6.9% 8.4% 8.4% 8.2%
ActualDescription
2009/2010(L.E. million)
Table No. (5)Expected Financial Performance
for FY 2009/2010
32
It is clear from the above table that the projections of the current FY 2009/2010 have been estimated in light of four key factors:
1. The beginning of the gradual ease of the global financial crisis. 2. Changes in international prices, especially of petroleum, wheat, edible oil
and some food commodities. 3. Indicators of higher a GDP growth rate in the first and second quarters of the
FY 2009/2010. 4. The new package of support for investments in the infrastructure of drinking
water and sanitation, with an amount of EGP 10 bn. Based on the above, the new budget projections for the current FY 2009/2010 will result in the following:
a. URevenues: • An expected increase in revenues, exceeding that estimated in the budget, by 14.9% (almost EGP 33.4 bn.), taking into account that the estimates of these revenues are still less by 8.5% than the results of the previous FY 2008/2009 due to the extension of the global crisis effects, instead of an estimated reduction in these revenues by 20.4%.
• It is worth mentioning that the new revenue projections included a 17.7% increase in tax revenues over the estimated value (about EGP 25.8 bn.). This is due to the expected increase in income taxes from the petroleum sector, following the rise of the world petroleum product prices, along with an increase in the petroleum product subsidies on the expenditure side. Moreover, this is also due to an anticipated increase in Suez Canal taxes as a result of the expected increase in the transit duties over the estimated value, in addition to intensification of efforts to increase tax revenues in light of the results of the first eight months of the FY.
• In light of actual developments, the reduction of expected grants by about 42.7% (to be limited to EGP 4.4 bn. instead of 7.7 bn.) is also taken into account when estimating the expected revenues.
• As for other revenues, those expected to rise increased by 15.2% (almost EGP 11.0 bn.), including EGP 10.0 bn. from the revenues of the New Urban Communities Authority to finance the increase in the investments of drinking water and sanitation with the same amount within the framework of the third Financial Stimulus Package, as well as the expected increase in petroleum profits due to increasing world prices and their impact on petroleum exports and imports. This is in addition to the impact of prices on petroleum revenues and the expected increase in the Suez Canal transit duties from USD 4.2 to 4.5 bn., in addition to the expected increase of other revenues realized from the private funds and accounts, which have counter-entries on the expenditure side, despite the reduction in some resources estimated in light of the implementation follow-up in the elapsed period of the current year.
b. UExpenses: • An expected increase in expenditures exceeding that estimated in the budget by about 10% (EGP 32.5 bn.), taking into account that the estimates of these
33
expenses are slightly greater than their counterparts under the financial year 2008/2009 by about 1.4%, instead of being less than them by 7.8%, according to the original budget estimates.
• The projected increase in expenditures is a result of the following:
An expected reduction in wages by about EGP 1.5 bn. in light of the actual results for the past eight months of the FY, compared to their counterparts in the previous FY.
An increase in subsidies, estimated at about EGP 21.7 bn., due to the anticipated increase in petroleum product subsidies resulting from the rising world prices (corresponding to an increase in the revenues), and a slight increase in ration subsidies due to the increasing bread consumption despite low world wheat prices, and the simultaneous increase in oil and sugar prices.
An expected increase in the procurement of goods and services by EGP 0.3 bn., corresponding to an increase in resources.
An expected increase in investments by about EGP 12.0 bn., with EGP 10.0 bn. of it allocated as a new package injected by the government to provide the requirements of sanitation, drinking water and infrastructure.
Uc. Budget Deficit: In light of the above projections for revenues and expenditures of the budget for the FY 2009/2010, it is expected that the overall budgetary deficit will reach about 8.2%, compared to 8.4%, due to the increase of expected proceeds from the tax revenues. U d. Sources of Financing: In view of the sources of financing, it is taken into account that the volume of domestic and foreign borrowing should be about EGP 125.6 bn. (compared to EGP 126.8 bn. under the approved budget) and that the payment of domestic and foreign loans of about EGP 27.3 bn. should be observed, so that the net borrowing would be EGP 98.3 bn. UII- Position of Domestic and Foreign Public Debt: In parallel with the efforts exerted to improve the performance of the State’s General Budget, intensive efforts are being made to correct the path of public debt, particularly those debts related to the agencies included in the State Budget, considering that such debt is essentially a reflection of the financing approved by your esteemed Assembly in order to cover the budget deficit. This should not be viewed as a manifestation of absolute numbers. It is natural that public debt figures will increase as long as this debt is associated with filling the gap of resources and uses in the General Budget yearly, and as long as the payment of loan installments of this debt are long-term ones. What is important to consider is the possibility of yearly reducing the volume of this debt relative to GDP, thus conveying the success of fiscal policy in the management and restructuring of public debt in line with sound economic perception. In recent years, the fiscal policy has already succeeded in reducing the ratio of the net
34
public debt of budgetary agencies to the GDP ,as evidenced by the following statement:
UIII- The main components of the draft State’s General Budget for the FY 2010/2011 The main structure of the State’s General Budget of the next FY 2010/2011 is based on a group of elements. These factors represent the major axes that should precede the preparation of the budget, they are precisely and clearly defined, and it is through these axes that we should outline a financial and economic framework for targeted development. These main elements of the forthcoming draft budget are represented in the following: U(a) Directing public spending towards achieving its goals and using it as a tool to increase economic development rates and to support services and community needs: Public spending creates a controversy, being the more difficult side of the State Budget, as opposed to the side of resources. The significance and difficulty of public spending as an aspect of the budget stems from it being an important engine for economic and social development. It is the aspect that bears the total and final community demand, and comes as an expression of national and community needs. Thus, directing public spending towards achieving its goals and using it as a tool to increase both economic and social development rates necessarily entails controlling public spending, and setting up sound estimates for it, by which we guarantee that public spending expresses our national needs and community needs. The above entails that the following be taken into consideration:
Domestic Debt 478,172 478,700 562,326 634,767
Foreign Debt 71,575 145,752 143,145 141,925
Total 549,747 624,452 705,471 776,692
GDP 744,800 895,500 1,038,600 1,181,000
Domestic Debt as a percent of GDP 64.2% 53.5% 54.1% 53.7%
Foreign Debt as a percent of GDP 9.6% 16.3% 13.8% 12.0%
Net Debt as a percent of GDP 73.8% 69.7% 67.9% 65.8%
Description End of June 2007
End of June 2008
End of June 2009
End of Dec. 2009
(L.E. million)
Table No. (6)Development of Net Public Debt of
General Budget Entities
35
1. Upon estimating public spending figures under the State’s General Budget, distribution of this spending should be in according to our priorities; especially community needs, including education, health, scientific research and utilities, etc.
2. Linking public spending with the quantitative and qualitative objectives that are required and specifying that clearly in the fundamentals of budget estimates.
3. Linking estimates of public spending not only to the framework of financial
appropriation balances, but also to the framework of program and performance budget.
4. Emphasizing the importance of maintenance as the main way to upkeep
national assets and wealth and as the main guarantee for the continuity of performance and the optimal utilization of available energy.
5. Providing in-kind investments necessary for development within the
framework of mixing the governmental role in the provision of infrastructure requirements and community needs with the private investments that participate in community building, the provision of necessary job opportunities and unemployment reduction.
U(b) Developing and maximizing the State’s general resources within the framework of a balanced strategy that guarantees meeting the requirements of public spending in accordance with national and community priorities: Public resources represent the second aspect of the budget, complementary to public spending, thus providing the requirements of this spending. The failure to provide sufficient resources leads to either disabling the role of public expenditure in the progress of the society, or alternately forcing the state to resort to borrowing and increasing public debt. Accordingly, the elements of the budget regarding estimates of public resources should be based on the following:
1. Estimating state resources in light of the objective basics that balance between the community capacities -especially the tax community- and the realized incomes, targeting the expansion of the tax community base to ensure justice among citizens.
2. Applying the comprehensiveness and generality principle to the State’s General Budget, so that the Public Treasury securely receives all its rights and resources from all bodies.
3. Committing to collect the state receivables and the tax and non-tax rights of
the Public Treasury, knowing that failure to collect Public Treasury rights will increase the budget deficit and public debt, all of which may be avoided by paying such receivables.
36
4. Activating modern tools for collecting state resources, including electronic collection and payment methods.
5. Opening the way for all to participate in a community dialogue about
proposals for increasing state resources. Production increases are certainly the main driver for increasing the ability of the State to collect the revenues necessary to meet its requirements.
U(c) Continued consideration of the social dimension as a permanent strategy for implementing the fiscal policy through the State’s General Budget: The State’s social role is associated with the continued provision of community services by the state, either in the form of cash or in-kind subsidies or in the form of educational and health services or other fields, that ensures maintaining social balance and providing care for low-income segments. There is no doubt that there are fundamental constituents that guarantee sound performance by the state of this social dimension, perhaps the most important of which are the following:
1. The State should provide citizens’ requirements proportionately to their actual needs. Subsidies and services provided by the State should be proportional to the income earned by every citizen. Therefore, those with less income should receive more subsidies. This concept of proportionality should be highly valued; otherwise, there would be a waste of subsidies and services directed at non-eligible groups.
2. Subsidy, education, health and transport services, in one way or another, represent a part of the real income of citizens, though they have an indirect financial form.
3. Good performance and timely delivery of these services to eligible target
groups should be a strategic goal to ensure the success of the role played by the budget. This does not only constitute an interest in good performance and the delivery of services to eligible target groups, but also an interest in maintaining public funds and channeling public spending in a cost-effective and sound way.
4. The fair distribution of State resources is a necessity and a sound approach
to the best use of State resources and their distribution to the aspects of spending that meet the main requirements of citizen and community priorities, especially those of low-income groups.
5. Taxpayers should be confident that their payments are directed to the needed
spending channels, and that these channels reflect their basic services requirements.
6. The good performance and quality of the services provided by the state to
citizens, within the framework of humanity and respect, as well as the facilitation and simplification of dealings, are necessary and may sometimes
37
be more important than state subsidies that are free of charge. Egyptian citizens have the right to good services in an appropriate manner and they may prefer to have access to such services, in return, for partial or full payment, instead of obtaining these services freely void of any content.
U(d) Raising the efficiency of the use of commodity stock and inventory: The good and rational management of commodity stock is a critical requirement, so that the increase in the stock does not represent inappropriate over-spending and a waste of public funds. The increase in commodity stock, and therefore the increase of inventory over the required strategic limits, may result in financial and administrative burdens that could have been avoided, and represents evidence of the failure of management, which should be taken caution of. Therefore, reviewing the status of commodity stock and, hence raising the efficiency of its use and its rapid discharge is considered a strategic goal of the State’s General Budget and one of the objectives of fiscal policy in general. In this regard, the following actions shall be taken:
1. Identifying the main and branch warehouses and surveying their components.
2. Conducting accurate classification and codification of inventory to identify their quantities and values.
3. Providing the General Authority for Government Services and the budget
sectors with accurate and detailed data on the inventory, its types, quantities and values.
4. Identifying surplus items and developing a plan, in coordination with the
General Authority for Government Services, to discharge those surpluses and direct them to other entities that are in need of them, along with prohibiting the purchase by the latter of items available in other government agencies.
5. Managing the movement of the market in an economic manner, activating its
mechanisms and reducing stagnant items.
6. Improving the quality of procured items and providing highly efficient technical cadres to carry out governmental procurement.
7. Committing to approved appropriations, avoiding non-essential spending,
committing to the GNP and observing the laws and regulations concerning government procurements.
8. Seeking to make use of surplus items stored in warehouses before resorting to
purchases and thus reducing public spending and limiting it to essential needs. U(e) Supporting the decentralization policy and maximizing the role of municipalities:
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• It has become necessary to move towards a broader and more comprehensive activation and application of decentralization, as it is one of the principles of good governance. This can only be achieved through genuine and serious linking between the authority, on one hand, and its responsibilities for performance and achieving economic and community goals, on the other hand.
• This is achieved when Sectoral Ministries assume their planning and supervisory roles, as well as supervision of performance exercised through the local administration to ensure the provision of speedy, accurate and quality services to citizens, since implementation is done on the local level.
• Decentralization guarantees the creation of cadres at the local administration level and the provision of a larger space for democracy through activating the role of the local popular councils to exercise their supervisory role, as well as the developing community participation, and thus the horizontal control over performance at the local level.
• Local Administration Law No. 43 of 1979 guarantees the comprehensive application of decentralization through providing broad powers to the local administration.
UThis entails taking the following into account:
1. Coordination between different governorates, concerned central ministries and the Ministry of Local Development in the areas of education, health, agriculture, housing and utilities, social affairs, transport and roads, etc., to allocate a strategic space for the governorates through which they may assume -with the provision of necessary allocations- the implementation of the tasks assigned to them and be responsible for their achievement before their local communities and serve their citizens at the territory of each governorate.
2. Distribution of uses and resources, as much as possible, to responsible centers within the ministries and service agencies, and linking this distribution to the fulfillment of duties and achievements, as well as linking each official to his responsibilities in order to activate good and successful management and detect the imbalances and bottlenecks of implementation.
Adopting decentralization methods leads to achieving the set goals and overcoming the constraints, in terms of:
• Providing a balance between authority and responsibility. • Applying the principle of comprehensiveness and generality of the budget in the framework of openness, transparency and disclosure, where the resources of the governorates and agencies may be used in covering their needs directly and meeting the requirements of development in such governorates, which is a good approach.
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• Confirming the effectiveness of performance from the administrative aspect and ensuring that appropriate decisions are made for each province in accordance with the requirements of each situation.
U(f) Public investments contribute in providing development requirements and represent a base for building community assets and national wealth: Public investments constitute a part of the total investments of the community and they combine with the private investments to form the strategic structure and developmental projects in the framework of the general economic and social development plan. This assists in forming the economic and social structure of the nation, increasing production, national income and GDP, providing job opportunities and limiting unemployment. Since this matter has become associated with public investments as being a part of the public expenditure, it should be implemented in light of governing aspects, which may be summarized in the following:
1. Interest in the provision and identification of investment requirements in uncompleted projects, despite the funds invested in them in previous years. There is great importance in activating and operating these projects, which represent untapped national wealth, to enable these projects to contribute to meet the community needs for which they have been constructed.
2. Each required project shall be accompanied by its sources of financing and a study of how to refund or repay these funds. This will help in achieving the greatest benefit from loan and grant contracts concluded between Egypt and international financing institutions. The more such loans are soft and grants are non-refundable, the more this will help us in reducing the cost of our investment projects and reducing the pressures on domestic public debt.
3. Implementing our projects within the legal frameworks, along with avoiding
direct order executions, will help provide more opportunities to implement these projects at the lowest possible cost and the greatest quality available. Full compliance with investments, within the approved limits of the budget, is necessary; any deviation thereof shall be considered a violation that necessitates accountability.
4. Strengthening the partnership between public and private sectors with regard
to financing public investments on a partnership basis, provided that necessary and reciprocal guarantees should be available for both the state and the participating private sector to achieve the best use of this system.
U(g) Increasing domestic production and encouraging investment flows in Egypt to ensure the realization of development, the increase of job opportunities and the reduction of unemployment: The increase of production and investment promotion should be among our
40
priorities, as they constitute a crucial objective linked to the success of our economic and social plan, as envisaged in the following:
1. Raising the GDP growth rate and the associated increase in national income, and the income of citizens.
2. Raising productivity rates, in a way that contributes to reducing imports and improving the trade balance of Egypt.
3. Promoting Egyptian exports, along with the required improvement of Egyptian products, and sound planning to increase our competitiveness in world markets.
4. Encouraging both domestic and foreign investments and creating the ability to attract these investments, as they have a positive impact on the development process, the creation of employment opportunities and the eradication of unemployment.
UIV- Social dimension as an anchor of the State’s General Budget within the framework of carrying out the directives of the President: While preparing the draft State’s General Budget for the FY 2010/2011, the fiscal policy was keen on emphasizing social dimension as an anchor for achieving social balance or community security, since maintaining adequate living conditions for low and middle -income brackets is an important goal to narrow the gap between different social segments. Accordingly, the new General Budget was keen on maintaining social spending in the areas of subsidized bread, basic supply commodities and petroleum products as well as to the provision of basic services, including education, health, transport, drinking water and sanitation, etc. Therefore, the draft State’s General Budget for FY 2010/2011 includes about EGP 213.2 bn. to meet the social dimension requirements, emphasizing the following:
1. The General Budget's dedication to the continued commitment of the Government to implement the directives of the President of the Republic, as outlined in his electoral program.
2. The commitment to provide citizens with all social services, with a focus on low-income groups, while ensuring the continued provision of subsidies to eligible target groups. The General Budget includes methods for ensuring such commitments.
3. Adopting an economic system that targets development, attracts
investments, boosts employment, reduces unemployment and provides citizens with their social requirements in various critical areas.
4. Efforts are exerted to gradually reduce unemployment, provide real job
opportunities for young people and make use of their capabilities in implementing projects that serve the country along with providing them with the appropriate income and revenues under a system designed to maximize the use of human wealth.
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In light of the above, and within the framework of emphasizing social dimension as an anchor for achieving social balance, the State’s General Budget has allocated about EGP 213,184 m. 0F
1 for the provision of social requirements of citizens, representing 54.0%1F
2 of total expenses under the draft General Budget, amounting to about EGP 394,494 m. 2F
3 The following table shows the social dimension appropriations allocated under the State’s General Budget for the next FY 2010/2011:
⌂1 This figure has been amended by the Egyptian Parliament to EGP 215,121 m. when it approved the 2010/2011 State’s General Budget. ⌂2 This figure has been amended by the Egyptian Parliament to 53.4% when it approved the 2010/2011 State’s General Budget. ⌂3 This figure has been amended by the Egyptian Parliament to EGP 403,168 m. when it approved the 2010/2011 State’s General Budget.
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Sub-Total Total Sub-Total Total
* Education :
Provision of educational process requirements for basic, pre-university and high education. Asserting by the state that education is a right for all and believing that education is the basic approach to production and development, as well as the provision of total application requirements of teacher's cadre and the faculties in all Egyptian Universities and Al-Azhar University.
48,370 45,933
* Health :
Prevision of health services to citizens and their treatment requirements in hospitals and health units, taking into account the improvement of doctors and nursing staff conditions. In addition to allocations Students Health Insurance within Health Insurance Authority's budget (L.E. 230 million), as well as medicine of (LE. 199 million).
19,171 16,900
* Subsidy:
To subsidize basic & additional supply commodities and oil products, of which diesel, botane, natural gas, gasoline, kerosene, mazot and electricity, within public policy to demonstrate fuel subsidy in state general budget, as well as subsidy of low-income segments housing, soft loans, promoting exports, subsidy of industrial development requirements.
101,772 59,475
* Enhancing and supporting pension and social insurance systems:
29,957 29,576
Provision of the requirements of enhancing and supporting pension systems and restructuring them includes:
Identifying interests on pension funds, which are used in funding government investment
16,100 15,912
Pension systems insurance benefits incurred by the treasury 2,817 2,623
Treasury contributions to enhance pension funds 4,100 5,000
Social security pension for poor families 1,400 1,120
Child pension 30 20Various social aids 5,510 4,901
* Other social services:
Services for recreation, culture and religions affairs 13,914 13,124
Total 213,184 165,008
Description2010/2011 Draft Budget 2009/2010 Budget
Note that the increase included in this table regarding appropriations of education, health recreation, culture and religious affairs are more than the appropriations shown in the functional classification of budget expenditures of such sectors, given the contingency allocations of these critical sectors within general categories.
(L.E. million)
Table No. (7)Appropriations of Social Dimension
43
The above statement indicates the government's dedication to continue performing its social mission, as it has become clear that:
1. The appropriations allocated for subsidies under the draft budget, amounting to about EGP 101.8 bn.⌂ 3F
4 have exceeded those under the budget of the FY 2009/2010 by about EGP 42.3 bn., i.e. with growth rate of 71.1%. Even when taking into consideration that expected subsidies will increase to EGP 83.9 bn. in the current year, the subsidies presented under the draft budget, amounting to a total of EGP 101.8 bn., will have increased by about EGP 17.9 bn., with a growth rate of 21.3%. In general, the subsidy appropriations, amounting to EGP 101.8 bn., represent 25.8% of total expenditures under the draft budget, which amounts to EGP 394.5 bn.⌂ 4F
5
2. The State continues to support the pension systems and provides the requirements of social insurance for the poor families. For this purpose, the draft budget included about EGP 30.0 bn., including the contributions of the Treasury to support Pension Funds, the benefits of insurance borne by the Treasury in the pension system, in addition to the insurance benefits borne by the Treasury for education, health, youth and culture sectors of about EGP 6.6 bn. and the interests paid to pension funds as a return on investment of their funds by the Public Treasury, where these interests are estimated at about EGP 16.1 bn.
3. Education appropriations under the draft State’s General Budget for the FY
2010/2011, which amount to EGP 48.4 bn.,⌂5F
6 emphasize the increase of appropriations allocated for this purpose by about 5.3% over those allocated in the FY for 2009/2010. Such funds represent about 12.3% of expenses under the draft budget.
4. Appropriations allocated to health and to the provision of health services for
citizens, amounting to EGP 19.2 bn., ⌂ 6F
7 have increased by 13.6%, compared to those appropriations allocated under the current budget for the year 2009/2010, which amount to EGP 16.9 bn. Appropriations allocated for health, which amount to EGP 19.2 bn., represent 4.9% of the total expenditures of the draft budget.
⌂4 This figure has been amended by the Egyptian Parliament to EGP 101.3 bn. when it approved the 2010/2011 State’s General Budget. ⌂5 This figure has been amended by the Egyptian Parliament to EGP 403.2 bn. when it approved the 2010/2011 State’s General Budget. ⌂6 This figure has been amended by the Egyptian Parliament to EGP 48.6 bn. when it approved the 2010/2011 State’s General Budget. ⌂7 This figure has been amended by the Egyptian Parliament to EGP 20.9 bn. when it approved the 2010/2011 State’s General Budget.
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5. The draft General Budget included about EGP 13.9 bn. ⌂ 7F
8 to support the youth and sports services, culture and religious affairs, with an increase of around 6.1%, compared to the established allocations for the current FY 2009/2010, which amount to EGP 13.1 bn. Appropriations allocated for these services account for 3.5% of the total budget expenditures.
⌂8 This figure has been amended by the Egyptian Parliament to EGP 14.1 bn. when it approved the 2010/2011 State’s General Budget.
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Chapter Four The Bases for Estimates of Uses and Resources of the Draft State’s General Budget for the Fiscal Year 2010/ 2011 Mr. Speaker of the People's Assembly, Ladies and Gentlemen, Members of the Esteemed Assembly, We have presented earlier the components related to the preparation of the draft State’s General Budget for the FY 2010/ 2011, the objectives of such draft budget, main pivots, relevant social and economic dimensions and the target indicators during that year. In light of what was presented, the draft General Budget for the FY 2010/2011 echoes the following: the fallout of the global financial crisis although its impacts are still felt, though to a lesser extent; the volatility that has characterized world prices of energy, food products and others; and the after-effects that have inflicted the traffic of international trade. Thus, the main estimates of the draft budget have taken into consideration the following:
I- The increasing improvement in the economy following the relative recession of the global crisis as a result of the reformative financial packages and measures implemented by different countries. At the same time, such an assumption does not negate the economic risks still engulfing the European economy, particularly that the underlying growth rate has dropped to less than 1.5 % compared to more than 3 % prior to the crisis, in addition to the financial difficulties that currently face some countries such as Greece, Spain, Ireland and others.
II- The Egyptian economy shall achieve a growth rate of about 5.8 % in 2010/2011, based on the increase in domestic demand and the gradual upturn in investment rates. The stability of the Egyptian economy has been sustained by the diversity of its growth sources, namely: manufacturing sectors, trade, building and construction, communications, tourism, gas and other economic sectors.
III- Dedicated attention to reducing the overall deficit and debt rates as a percentage of GDP in the General Budget, following the temporary halt as a result of the global financial crisis. Therefore, the strategic orientation of the financial policy, which defines the structure of the General Budget of the new FY, is that the Egyptian government resumes work on reducing the budget deficit without jeopardizing the priorities of social expenditure. Accordingly, the 2010/2011 draft budget targets an overall deficit of no more than 7.7 %⌂
8F
9 of GDP, compared to the 8.4% in 2009/2010. In light of the current aggregates, this results in a preliminary deficit of 1.1 %⌂
9F
10 of GDP against 2.4 % in 2009/2010.
⌂9 This figure has been amended by the Egyptian Parliament to 7.9% when it approved the 2010/2011 State’s General Budget. ⌂10 This figure has been amended by the Egyptian Parliament to 1.3% when it approved the 2010/2011 State’s General Budget.
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IV- Observing the major indicators and assumptions used in the development of the General Budget estimates for the year 2010/ 2011, as detailed in the following table:
Estimates of Public Uses and Resources in the State’s General Draft Budget for the FY 2010/ 2011: The draft State’s General Budget for the FY 2010/ 2011 has been developed to reflect the following: the above economic indicators; the initial phases of recovery from the global financial crisis; the volatility in world prices of energy, food products and others; and the after-effects on international trade traffic. I am honored to present to you the following major aspects of the draft General Budget:
I- The gross primary estimates of the State’s General Budget, including:
a) Uses (Public Spending). b) Public resources.
Description 2010/2011 Draft Budget
2009/2010 Expected
2008/2009 Actual
* Real growth rate to GDP (%) 5.8 5.2 4.7* Economic deflator (%) 9.2 10.2 10.8* Average of Exchange rate (L.E./$) 5.6 5.6 5.5* Average of interest rate of government debt 10.5 10.5 11.6* Average price of Brent barrel ($ / barrels) 1/ 84.0 75.9 68.9* Average price of international wheat ton ($/ton) 1/2/ 200.0 190.0 229.0* Average price of international oil ($/ton)1/2/ 879.0 843.0 950.0* Average price for international maize ($/ton) 3/ 1,333 1,333 2,112* Average of customs duties effective rate in Egypt 4/ 4.1 4.6 4.7* International growth rates of imports of goods (%) 5/ 6.3 5.8 -12.3* International Economic growth rate (%) 5/ 4.2 3.9 -0.8Note:* GDP at market prices (L.E. Billion) 1,378 1,198 1,038.6* Consumption growth rate (%) 14.3 15.3 22.1* Investment growth rate (%) 24 15.3 -0.2* Growth rate of exports of goods and services (%) 22.5 13 -12.1* Growth rate of imports of goods and services (%) 24.5 13.5 -4.31/ It is calculated in light of market price averages (SPOT) and future market of different dates of delivery, such estimates are calculated periodically.2/ Exchange rates in world stock markets, as well as other purchase expenditures.3/ Maize price average for the FY. 2009/2010 and 2010/2011 is estimated at LE. 200 for ardab (= 52.120 kg).4/ Ad valorem customs duties as a percentage to total imports of goods.5/ According to the estimates of IMF- World Economic Outlook Database- January 2010.
Table No. (8)Key Indicators and Assumptions
47
II - The detailed estimates of public expenditures of the State’s General Budget, including:
a) Public expenditure items according to economic classification. b) Public expenditure items according to functional classification.
III- Detailed estimates of public revenues.
Estimates of the draft State’s General Budget for the FY 2010/2011 have reached approximately EGP 481.0 bn., ⌂10F
11 compared to EGP 354.6 bn. in the 2009/2010 budget, with an increase of EGP 126.4 bn., i.e. 35.6 %.This is in addition to the supplementary budget approved by your esteemed Assembly of about EGP 10.0 bn., pursuant to Law No. 2 of 2010, as a second package to stimulate public investments. The amended budgeted estimates of the 2009/2010 uses and resources have reached EGP 364.6 bn. ⌂11 This figure has been amended by the Egyptian Parliament to EGP 489.7 bn. when it approved the 2010/2011 State’s General Budget.
I- Gross Primary Estimates of the State’s General Draft Budget for the Fiscal Year 2010/ 2011
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The following table illustrates the uses and resources of the draft budget, including the different sources of financing:
It is noteworthy to mention that both operating expenses, on one hand, and revenues, on the other, point to the requirements of the management of government work and the available real revenues. Thus, the gap between both expenses and revenues explains the cash deficit of the General Budget. In addition to these expenses, when the requirements for the acquisition of financial assets of lending and contributions (excluding the contribution of the Restructuring Fund) are added and when receipts from acquisition of financial assets (without the privatization proceeds) are added to revenues, the gap between both represents the net acquisition of financial assets. Such divide, when added to the cash deficit of the aforementioned budget, will determine the overall deficit of the State’s General Budget. In fact, it represents the new net borrowing, or net increase in public debt, having excluded the privatization proceeds, if any.
(L.E. million)2010/2011
Draft Budget Budget Revised Budget
(1) (2) (3)Uses:
* Public Expenditures 394,494 323,917 333,917 70,577 60,577Includes wages, purchase, of goods and services, interests, subsidy, grants, expenses and investments
* Acquisition of financial assets 4,240 3,562 3,562 678 678
Includes contributions, lending to economic authorities and corporations, and supporting restructure fund
* Payments of domestic and foreign loans installments 82,250 27,158 27,158 55,092 55,092
Total Uses 480,984 354,637 364,637 126,347 116,347
Resources:* Public Revenues 280,660 224,986 234,986 55,673 45,673Includes tax revenues, grants and non-tax revenues* Receipts from acquisition of financial assets 12,772 2,832 2,832 9,940 9,940
Includes receipts from installments of direct loans or revolving privatization proceeds* Borrowing and issuance of securities 187,552 126,818 126,818 60,734 60,734
Includes domestic borrowing on bills and bonds and foreign borrowing
Total Resources 480,984 354,637 364,637 126,347 116,347
Description
2009/2010 Change
(2-1) (3-1)
Table No. (9)Uses & Resources of the State's General Budget
49
The following table outlines available expenses, revenues and the deficit according to the 2010/2011 draft budget compared to the 2009/2010 budget and the relevant amended and projected budget and compared to actual results of the FY 2008/2009:
2010/2011 2008/2009
Draft Budget Budget Revised Budget Expected Actual
Public Expenditures 394,494 323,917 333,917 356,372 351,5001- Wages and compensations of employees 94,609 87,485 87,485 85,987 76,147
2- Purchase of goods and services 28,357 27,349 27,349 27,627 25,072
3- Interests 90,629 71,066 71,066 71,066 52,810
4- Subsidies, grants and social benefits 115,916 73,480 73,480 95,172 127,033
5- Other Expenditures 31,125 28,058 28,058 28,162 27,0076- Purchase of non-financial assets "Investments" 33,859 36,480 46,480 48,358 43,430
Public Revenues 280,660 224,986 234,986 258,407 282,504
1- Tax Revenues 197,274 145,544 145,544 171,335 163,222
2- Grants 3,156 7,700 7,700 4,415 7,984
3- Other Revenues 80,230 71,743 81,743 82,657 111,299
Cash Deficit (Expenditures - Revenues) 113,834 98,931 98,931 97,964 68,995
Net acquisition of financial assets -8,282 730 730 733 2,831
Overall Deficit 105,552 99,660 99,660 98,697 71,826
Primary Deficit 14,923 28,594 28,594 27,631 19,016
GDP 1,378,000 1,181,000 1,181,000 1,198,000 1,038,600
Revenues as a percentage of GDP 20.4% 19.1% 19.9% 21.6% 27.2%
Expenditures as a percentage of GDP 28.6% 27.4% 28.3% 29.7% 33.8%
Cash Deficit as a percentage of GDP 8.3% 8.4% 8.4% 8.2% 6.6%
Overall Deficit as a percentage of GDP 7.7% 8.4% 8.4% 8.2% 6.9%
Primary Deficit as a percentage of GDP 1.1% 2.4% 2.4% 2.3% 1.8%
Description2009/2010
(L.E. million)
Table No. (10)Expenditures and Revenues
50
a. Uses (Public Spending)
For the 2010/ 2011 draft General Budget, it is evident from the State’s public spending that the total uses are estimated at EGP 481.0 bn.⌂ 11F
12 distributed among the following three main components:
• Expenditures; • Acquisition of financial assets; • Repayment of loan installments.
1. UExpenditures:
The expenses of the 2010/2011 draft General Budget are estimated at EGP 394,494 m.,⌂
12F
13against approximately EGP 323,917 m. estimated for the FY 2009/2010, with an increase of EGP 70,577 m., i.e. 21.8 % and 18.1 % of the amended budget. Furthermore, estimates of the new draft budget are higher than those projected for the FY 2009/2010 by about EGP 38,122 m. It is important to note that the aforementioned increase in expenses is originally attributed to the rise in world prices of petroleum and imported food commodities, which are tied in their total to subsidized petroleum products and food supplies. In addition to this, there are also inevitable increase in wages and payments of public debt interests according to their due dates.
The following table outlines expenses in the 2010/2011 draft budget, compared to projections in the FY 2009/2010:
⌂12 This figure has been amended by the Egyptian Parliament to EGP 489.7 bn. when it approved the 2010/2011 State’s General Budget. ⌂13 This figure has been amended by the Egyptian Parliament to EGP 403,168 m. when it approved the 2010/2011 State’s General Budget.
51
2. UAcquisition of Financial Assets:
The acquisition of financial assets is represented by the following: the contributions of the Public Treasury to some economic authorities that suffer from imbalances in their financing structures; the Treasury contributions to reforming the financing positions of some companies; and the available loans to some organizations, which are considered a liability on the State’s Public Treasury. The acquisition of financial assets in the 2010/2011 draft budget are estimated at approximately EGP 4,240 m., against EGP 3,562 m. in the 2009/2010 budget. Nonetheless, it is expected to result in about EGP 3,938 m., as evident from the following table:
Draft Budget WeightsTotal Expected Weights
Total
L.E. million % L.E. million % L.E. million %
* Wages and compensation of employees 94,609 24.0 85,987 24.1 8,622 10.0
* Purchase of goods and services 28,357 7.2 27,627 7.8 730 2.6
* Interests 90,629 23.0 71,066 19.9 19,563 27.5
* Subsidies, grants and social benefits 115,916 29.4 95,172 26.7 20,744 21.8
* Other expenses 31,125 7.9 28,162 7.9 2,963 10.5
* Purchase of non-financial assets "Investments" 33,859 8.6 48,358 13.6 -14,499 -30.0
Total 394,494 100.0 356,372 100.0 38,122 10.7
Description
2010/2011 2009/2010
Change Growth Rate
Table No. (11)Expenditures
52
3. URepayment of Loan Installments:
In the 2010/2011 draft State’s General Budget, payments of due or amortized domestic and foreign loan installments are estimated at approximately EGP 82,250 m. against EGP 27,350 m. projected in the 2009/2010 budget.
Loan installments defined in the draft budget are as follows:
It is noticeable that the above loan installments entail amortization of the maturing T-bonds. Generally, it should be noted that paying loans and amortization of bonds are not entered as components of the budget deficit. Such paid liabilities are addressed by
Draft Budget Weights Total Expected Weights
Total
L.E. million % L.E. million % L.E. million %
* Shares and other equities in economic authorities 1,440 34.0 2,100 53.3 -660 -31.4
* Shares and other equities in corporations 980 23.1 1,080 27.4 -100 -9.3
* Various Loans 30 0.7 100 2.5 -70 -69.9* Contributions in International Organizations 97 2.3 140 3.6 -43 -30.9
* Contributions in restructuring fund 250 5.9 380 9.6 -130 -34.2
* Other 1,443 34.0 138 3.5 1,304 942.5
Total 4,240 100.0 3,938 100.0 301 7.7
Description
2010/2011 2009/2010
Change Growth Rate
Table No. (12)Acquisition of Financial Assets
2010/2011
Draft Budget Budget Expected
* Installments of Domestic Loans 72,376 18,127 18,286
* Installments of Foreign Loans 9,719 9,031 9,064
* Payment of Total Loans 155 -- --
Total 82,250 27,158 27,350
Description2009/2010
(L.E. million)
Table No. (13)The Payment of Domestic and Foreign Loan
Installments
53
exclusion from financing sources or new borrowings; and thus determine net real increases in public debt. Said repayment of loans and bonds is one of the strengths of the budget and represents a real reduction of the volume of public debt, be it domestic or foreign.
b. Public Resources:
The uses and resources of the budget (as shown in Table 9) indicate that the total resources in the draft General Budget for the 2010/2011 FY are estimated at EGP 481.0 bn.,⌂ 13F
14 divided among the following three major components: • Public revenues; • Receipts from acquisition of financial assets; • Borrowing and issuance of securities.
1. UPublic Revenues:
Public revenues are represented in revenues collected from the operations and performance of direct and indirect activities of units and agencies, included in the State’s General Budget. These basically include the different types of tax revenues: income, sales taxes and customs duties. They also include domestic and foreign grants, other revenues originally represented in surpluses and profits realized by economic authorities and public enterprises sector and revenues of government services in general. Public revenues, as earlier indicated in Table 10, are estimated at approximately EGP 280.7 bn.⌂14F
15 in the 2010/2011 draft budget, against EGP 225.0 bn. in the 2009/2010 budget. However, the proceeds are expected to amount to EGP 258.4 bn. in light of the efforts exerted to improve tax and other revenues.
⌂14 This figure has been amended by the Egyptian Parliament to EGP 489.7 bn. when it approved the 2010/2011 State’s General Budget. ⌂15 This figure has been amended by the Egyptian Parliament to EGP 285.8 bn. when it approved the 2010/2011 State’s General Budget.
54
The following table clarifies the public revenues mentioned above:
2. UReceipts from Acquisition of Financial Assets:
In the 2010/2011 draft budget, these receipts are estimated at EGP 12.8 bn., against approximately EGP 2.8 bn. in the 2009/2010 budget, with an increase of around EGP 10.0 bn. This increase is ascribed to the fact that the proposed draft budget includes an amount of EGP 9.6 bn. as installments that will be collected from electricity companies (with a counter-entry in expenses of EGP 3.3 bn. under lighting in Chapter Two “Purchase of Goods and Services”; in addition to EGP 6.3 bn. as a subsidy to electricity in Chapter Four “Subsidy, Grants and Social Benefits,” with a view to pay part of the debt of the electricity sector to the petroleum sector). 3. UBorrowing and Issuing of Securities:
In the 2010/2011 draft General Budget, borrowing and issuing of securities are estimated at EGP 187.6 bn.,⌂15F
16 against EGP 126.8 bn. in the 2009/2010 budget, with an increase of EGP 60.8 bn., i.e. 47.9 %. Borrowing is considered a main source of financing the budget deficit, filling the gap between public revenues and operating expenses, and filling the gap between receipts from acquisition and acquisition of financial assets. In addition, borrowing covers the repayment of the aforementioned domestic and foreign loans, estimated at EGP 82.3 bn.
⌂16 This figure has been amended by the Egyptian Parliament to EGP 191.1 bn. when it approved the 2010/2011 State’s General Budget.
Draft Budget Weight-to-Total Expected Weight-
to-Total
L.E. million % L.E. million % L.E. million %* Tax Revenues:
- General Taxes 106,542 38.0 93,143 36.0 13,399 14.4
- Sales Taxes 64,226 22.9 54,315 21.0 9,911 18.2- Customs Taxes 15,500 5.5 14,057 5.4 1,443 10.3
- Other Tax Revenues 11,006 3.9 9,820 3.8 1,186 12.1
Total 197,274 70.3 171,335 66.3 25,939 55.0
* Grants 3,156 1.1 4,415 1.7 -1,259 -28.5
* Non-Tax Revenues 80,230 28.6 82,657 32.0 -2,427 -2.9From surpluses, profits service revenues and others
Grand Total 280,660 100.0 258,407 100.0 22,253 8.6
Description
2010/2011 2009/2010
Change Growth Rate
Table No. (14)Public Revenues
55
It is important to point out that the repayment of such loans in fact represents a reduction in the volume of public debt. Thus, the real measure of debt increase is expressed as the overall budget deficit or an equal amount of net borrowing, i.e. the new borrowing minus repayment of domestic and external loans.
56
Mr. Speaker of the People's Assembly, Ladies and Gentlemen, Members of the Esteemed Assembly, I have presented earlier the major estimates of the 2010/ 2011 draft State’s General Budget, totaling EGP 481.0 bn.,⌂ 16F
17 outlining the primary functions, whether those relevant to public uses or public resources. The State’s General Budget should present expenses according to their economic and functional classifications. It should also present these classifications as distributed among public expenditure chapters and items within a framework of transparency and clarity. Budget expenses constitute the major part of the volume of uses in the State’s General Budget amounting to EGP 394.5 bn.⌂ 17F
18 of the total uses, which are estimated at EGP 481.0 bn.⌂18F
19 Therefore, it is crucial to submit the breakdown of these expenses in accordance with:
Economic classification of the budget. Functional classification of the budget.
a. Major Expenditure-Related Items according to Economic Classification:
According to the economic classification of the State’s General Budget, the major expenditure-related items are as follows:
Wages and compensation of employees; Purchase of goods and services; Interests; Subsidy, grants and social benefits; Purchase of non-financial assets, “investments.”
⌂17 This figure has been amended by the Egyptian Parliament to EGP 489.7 bn. when it approved the 2010/2011 State’s General Budget. ⌂18 This figure has been amended by the Egyptian Parliament to EGP 403.2 bn. when it approved the 2010/2011 State’s General Budget. ⌂19 This figure has been amended by the Egyptian Parliament to EGP 489.7 bn. when it approved the 2010/2011 State’s General Budget.
II- Detailed Estimates of Public Expenditures of the 2010/2011 Draft State’s General Budget
Wages and Compensation of Employees
57
Chapter One “Wages and Compensation of Employees” in the 2010/2011 draft General Budget is estimated at EGP 94,609 m.,⌂ 19F
20 against EGP 85,987 m. projected in the 2009/2010 FY , with an increase of EGP 8,622 m., i.e. 10.0 % . Notice that the appropriations for wages and compensation of employees constitute 24% of total operating expenses in the draft budget, estimated at EGP 394,494m.⌂20F
21 Furthermore, it represents 19.7 % of total public uses of the draft State’s General Budget, estimated at EGP 480,984 m. ⌂21F
22 It should be stressed that the State’s commitment to providing wages, remunerations and incentives for employees highlights the State’s interest and role in achieving the following social and economic aspects:
Absorbing, on an actual full-time basis, around 5.8 million employees in the governmental sector (not to mention 0.6 million employees and workers in economic authorities). This provides security to approximately 24 million citizens, constituting those employees and their families.
Continuing to offer social allowances for employees. Since 1987/1988 until the FY 2009/2010, these have amounted to 305% of basic salaries, inclusive of the increment decreed as of May 2008 of 30% of the basic wage, in compliance with the President’s directives, and as per Law No. 114 of 2008. It has been taken into account that such allowances be integrated within the basic salary every five years. In the FY 2009/2010, the allowances that have been approved until the FY 2004/2005 were integrated, estimated at 220 % of the basic salaries.
There are consecutive increments in the volume of the wages’ budget incurred by the State’s General Budget. In the 1980/1981 State’s General Budget, wages were estimated at approximately EGP 1,452.6 m.; in 1990/1991 at approximately EGP 7,118.4 m.; in 2000/2001 at around EGP 28,066.5 m.; and now in the 2010/2011 draft budget at about EGP 94,609 m.⌂22F
23
The information presented definitely reflects the State’s growing interest in civil servants and their households and reflects that the workforce in Egypt is one of the major elements of production. The government’s endeavor towards developing the concept of the public service will be the driving force for such productive element towards more progress and advancement.
The estimated wages in the submitted draft budget are distributed among their major purposes as follows:
⌂20 This figure has been amended by the Egyptian Parliament to EGP 95,903 m. when it approved the 2010/2011 State’s General Budget. ⌂21 This figure has been amended by the Egyptian Parliament to EGP 403,168 m. when it approved the 2010/2011 State’s General Budget. ⌂22 This figure has been amended by the Egyptian Parliament to EGP 489,657 m. when it approved the 2010/2011 State’s General Budget. ⌂23 This figure has been amended by the Egyptian Parliament to EGP 95,309 m. when it approved the 2010/2011 State’s General Budget.
58
The 2010/2011 draft General Budget includes about EGP 28,357 m⌂
23F
24. appropriated for purchasing goods and services necessary to run governmental work, against the projected EGP 27,627 m. in the FY 2009/ 2010, with an increase of EGP 730 m., i.e. 2.6 %. The appropriations dedicated to purchasing goods and services constitute around 7.2 % of total operating expenses in the draft budget, estimated at EGP 394,494 m⌂
24F
25. Moreover, these appropriations represent 5.9 % of total public uses in the submitted draft budget, estimated at EGP 480,984 m⌂
25F
26. These are essential appropriations to be spent on the requirements of schools, hospitals and other State agencies, in addition to regular maintenance, lighting, water and other inevitable work-related requirements. The following table shows the distribution of these appropriations among their main components in the State’s General Budget, compared to projections for the FY 2009/2010:
⌂24 This figure has been amended by the Egyptian Parliament to EGP 28,857 m. when it approved the 2010/2011 State’s General Budget. ⌂25 This figure has been amended by the Egyptian Parliament to EGP 403,168 m. when it approved the 2010/2011 State’s General Budget. ⌂26 This figure has been amended by the Egyptian Parliament to EGP 489,657 m. when it approved the 2010/2011 State’s General Budget.
Draft Budget Weight-to-Total Expected Weight-
to-Total
L.E. million % L.E. million % L.E. million %
* Permanent staff 19,101 20.2 16,961 19.7 2,140 12.6
* Temporary staff 1,419 1.5 1,156 1.3 263 22.7
* Rewards 33,650 35.6 30,906 35.9 2,744 8.9
* Specific Allowances 8,964 9.5 8,748 10.2 216 2.5
* Cash Benefits 10,737 11.3 12,130 14.1 -1,393 -11.5
* In-Kind Benefits 2,263 2.4 2,087 2.4 175 8.4
* Insurance Benefits 9,445 10.0 8,802 10.2 643 7.3
* Other Wages Types and Contingencies 9,029 9.5 5,196 6.0 3,833 73.8
Total 94,609 100.0 85,987 100.0 8,622 10.0
Wage Types
2010/2011 2009/2010
Change Growth Rate
Table No. (15)Wages and Compensation of Employees
Purchase of Goods and Services
59
It is noticeable that the appropriations earmarked for purchasing goods and services in the submitted draft budget are as follows:
URaw Materials
In the 2010/2011 draft budget, the amounts allotted for raw materials reach about EGP 4,517 m., against EGP 4,492 m. projected in the 2009/2010 budget, with an increase of EGP 25.0 m., i.e. 0.5 %.
Draft Budget Weight-to-Total Expected Weight-
to-Total
L.E. million % L.E. million % L.E. million %
* Raw materials (medicines, food and other raw materials) 4,517 15.9 4,492 16.3 25 0.5
* Operating fuels, oils and moving parts 1,063 3.7 1,758 6.4 -696 -39.6
* Fuels and oil for cars 91 0.3 87 0.3 4 5.0
* Spare parts and fitting 834 2.9 845 3.1 -11 -1.3
* Lighting 5,219 18.4 6,292 22.8 -1,073 -17.1
* Water 666 2.3 384 1.4 282 73.4
* Maintenance 3,664 12.9 3,426 12.4 238 7.0
* Printing expenses 1,202 4.2 1,246 4.5 -44 -3.5
* Transport and Transportations 1,909 6.7 1,810 6.6 99 5.5
* Post and communication services 459 1.6 319 1.2 141 44.1
* Expenses of Judicial Judgment enforcement 1,536 5.4 2,023 7.3 -487 -24.1
* Purchase of goods and services for special funds and accounts 1,763 6.2 1,857 6.7 -94 -5.1
* Other items of the second chapter 3,984 14.0 3,088 11.2 896 29.0
* General contingencies 1,450 5.1 0 0.0 1,450 ـ
Total 28,357 100.0 27,627 100.0 730 2.6
Description
2010/2011 2009/2010
Change Growth Rate
Table No. (16)Purchase of Goods and Services
60
Raw materials are represented as follows: Draft Budget
2010/ 2011 EGP Million
Projected 2009/ 2010
EGP Million Drugs, serums and vaccines
1,992 2,116
Food for schools and institutes
1,501 1,407
Other raw materials for operational requirements
-------------------------------
1,024 973
Total Total 4,517⌂ 26F
27 4,492
ULighting:
In the 2010/2011 draft budget, lighting appropriations are estimated at EGP 5,219 m., against the projected EGP 6,292 m. in the FY 2009/2010, with a decline of EGP 1,073 m., i.e. nearly 17.1 %. Lighting appropriations include EGP 3.5 bn. outstanding to the electricity sector, with a counter-entry in revenues based on the settlement between claims of the government agencies to the electricity sector and claims of the electricity sector to the Public Treasury.
UWater:
In the 2010/2011 draft budget, water appropriations amount to EGP 666 m., against the projected EGP 384 m. in the current FY, with an increase of EGP 282 m., i.e. 73.4 %. This increase is to address the water supply costs, taking into account necessary rationalization controls.
UMaintenance Expenses:
Appropriations in the submitted draft budget include about EGP 3,664 m.⌂27F
28 as maintenance expenses, against the projected EGP 3,426 m. in the 2009/2010 budget, with an increase of EGP 238 m., i.e. 7 %.
⌂27 This figure has been amended by the Egyptian Parliament to EGP 4,816 m. when it approved the 2010/2011 State’s General Budget. ⌂28 This figure has been amended by the Egyptian Parliament to EGP 3,864 m. when it approved the 2010/2011 State’s General Budget.
61
These expenses are mainly maintenance expenses directed at the purification of irrigation and drainage system equipment and sanitation, maintenance and renovation of buildings and constructions, maintenance of roads and bridges, as well as maintenance of machinery, equipment ,means of transportation and others.
UPrinting Expenses U:
The submitted draft budget includes EGP 1,202 m. for printing expenses, against a projected EGP 1,246 m. in the FY 2009/2010, with EGP 44 m. reduction, i.e. 3.5 %.
Draft Budget 2010/ 2011
EGP/ Million
Projected 2009/ 2010
EGP/ Million Printing of school textbooks and other publications
1,163 1,212
Other
---------------------------------------
39 34
Total Total 1,202 1,246
UTransportation:
In the 2010/2011 draft budget, appropriations for transportation are estimated at approximately EGP 1,909 m. They are expected to amount to about EGP 1,810 m. in the current FY, with an increase of EGP 99 m., i.e. 5.5 %, to handle some arrears from previous years related to money allowance for workers in remote areas. Appropriations earmarked for transportation are as follows:
Draft Budget 2010/ 2011 EGP/ Million
Projected 2009/ 2010 EGP/ Million
Money allowance for remote areas 1,327 1,289
Internal travel allowance 353 305
External travel allowance (for abroad) 149 150
Other
--------------------------------------------------------
80 66
Total Total 1,909 1,810
62
UJudicial Judgment Execution Expenses:
The draft budget submitted before you includes EGP 1, 536 m. entry for the judicial judgment execution expenses, against EGP 2,023 m. projected in the 2009/2010 budget, with a reduction of EGP 487 m., i.e. a drop of 24.1 %. This is ascribed to the fact that the Treasury is committed to paying for the expenses relevant to judicial judgment execution expenses incurred on both Egyptian Customs Authority and the Tax Authority, as opposed to excluding these expenses from the revenues of these authorities.
These are interests due on government borrowing, being one of the sources that the government resorts to in order to finance its activities. Mostly, these constitute interests due on bonds and notes, whether short or long term, or on loans to finance the State’s general plan projects. The interests to be paid for domestic and external loans are estimated in the 2010/2011 draft budget at EGP 90,629 m.,⌂28F
29 against EGP 71,066 m. projected in the FY 2009/2010, with an increase of EGP 19,563 m., i.e. 27.5 %. Loan interests constitute 23.0 % of the total appropriations earmarked for operating expenses in the State’s budget, estimated at EGP 394,494 m.⌂29F
30 Furthermore, loan interests represent 18.8 % of total public uses in the draft General Budget, estimated at EGP 480,984 m.⌂30F
31 The following table illustrates the division of domestic and foreign interests according to main types, compared to the projected in the current FY:
⌂29 This figure has been amended by the Egyptian Parliament to EGP 91,142 m. when it approved the 2010/2011 State’s General Budget. ⌂30 This figure has been amended by the Egyptian Parliament to EGP 403,168 m. when it approved the 2010/2011 State’s General Budget. ⌂31 This figure has been amended by the Egyptian Parliament to EGP 489,657 m. when it approved the 2010/2011 State’s General Budget.
Interests
63
The above interests are inevitable interests. It is important to point out that these interests amount to EGP 90,629 m.⌂ 31F
32 and represent 6.6 % of GDP. This stresses the fact that when measuring the budget deficit, the preliminary deficit must be noted first. The preliminary deficit represents the overall deficit before calculation of the loan interests. The ratio of the overall deficit to GDP in the draft General Budget amounts to 7.7 %⌂
32F
33 whilst the initial deficit (excluding interest payments) amounts to 1.1 %⌂
33F
34of GDP. Worthy of mention is that estimates of the interest dues are based on actual interest rates on bills, bonds and loans presently due, taking into account assumptions relevant to projected borrowing within the next period and the coming FY 2010/2011. They
⌂32 This figure has been amended by the Egyptian Parliament to EGP 91,142 m. when it approved the 2010/2011 State’s General Budget. ⌂33 This figure has been amended by the Egyptian Parliament to 7.9% when it approved the 2010/2011 State’s General Budget. ⌂34 This figure has been amended by the Egyptian Parliament to 1.3% when it approved the 2010/2011 State’s General Budget.
Draft Budget Weight-to-Total Expected Weight-
to-Total
L.E. million % L.E. million % L.E. million %
(A) Foreign Interests
* Foreign public debt interests 3,899 4.3 3,586 5.0 313 8.7
* Foreign interests paid by entities 83 0.1 80 0.1 4 4.4
Total of (A) 3,983 4.4 3,666 5.2 317 8.6
(B) Domestic Interests
* CBE bonds interest 9,202 10.2 10,023 14.1 -821 -8.2
* Public treasury bills interest 33,426 36.9 25,862 36.4 7,564 29.2
* Egyptian treasury bonds interest 19,057 21.0 9,835 13.8 9,222 93.8
* Bonds interest of Banks Capital increase 320 0.4 320 0.5 0 0.0
* Temporary coverage interest of debit balance 1,900 2.1 2,486 3.5 -586 -23.6
* Interests on pension funds' bonds 16,100 17.8 16,100 22.7 0 0.0
* Domestic bonds interest 490 0.5 499 0.7 -9 -1.8* Others 6,150 6.8 2,275 3.2 3,876 170.4
Total of (B) 86,646 95.6 67,400 94.8 19,246 28.6
Total 90,629 100.0 71,066 100.0 19,563 27.5
Description
2010/2011 2009/2010
Change Growth Rate
Table No. (17)Interests
64
are also based on the effective and projected return rate in the national economy, taking into consideration the stability of the foreign exchange market and the Central Bank of Egypt’s (CBE) trend in adopting a monetary policy supportive of economic development. It is further important to point out that interests on investment loans are mostly directed to pension funds, estimated at EGP 16,100 m. The State is committed to a new approach towards these funds: to deliver the dues to pension funds from returns of investing their money for the State in cash, instead of capitalizing these at the National Investment Bank (NIB). Moreover, a large portion of the NIB liabilities to insurance and pension funds has been transferred to the Public Treasury, within the limits of the Treasury debts to the NIB. Thus, the Public Treasury has become solely responsible for these amounts. Bonds have been already issued, incurred on the Public Treasury for the pension funds, estimated at EGP 201.2 bn., at an interest rate compatible with market rates. This measure ensures the rights of pensioners and preserves funds. In addition, the fact that the Public Treasury pays in cash interests on pension funds transferred to it as per bonds issued on the Public Treasury, has helped immensely in providing cash flows and liquidity for the funds; thus enabling these funds to pay, in full, due pensions. Chapter Four “Subsidies, Grants, and Social Benefits” in the 2010/2011 draft General Budget is estimated at EGP 115,916 m.,⌂34F
35 against approximately EGP 95,173 m. projected in the FY 2009/2010, with an increase of EGP 20,744 m., i.e. roughly 21.8%. This increase, in the appropriations assigned for Chapter Four, is attributed to the increase in the subsidies dedicated to promoting exports, supporting electricity as well as increasing the appropriations for subsidies on petroleum products, agricultural crops, transportation and social security pensions. In view of the above, the appropriations earmarked for subsidies, grants and social benefits in the 2010/2011 draft budget are represented in the following main appropriations: ⌂35 This figure has been amended by the Egyptian Parliament to EGP 116,616 m. when it approved the 2010/2011 State’s General Budget.
Subsidies, Grants and Social Benefits
65
EGP/ Million Subsidies earmarked for goods and
services 101,772⌂ 35F
36
Grants to different agencies 4,114
Social assistance and benefits to pension funds and social solidarity
6,083
Appropriations and reserves for subsidy and different aids.
---------------------------------------------------------------
3,947
Total 115,916⌂ 36F
37
⌂36 This figure has been amended by the Egyptian Parliament to EGP 101,272 m. when it approved the 2010/2011 State’s General Budget. ⌂37 This figure has been amended by the Egyptian Parliament to EGP 116,616 m. when it approved the 2010/2011 State’s General Budget.
66
The following table indicates the allocation of these appropriations to relevant main entries, compared to the projections of these appropriations in the FY 2009/ 2010:
Draft Budget Weight-to-Total Expected Weight-
to-Total
L.E. million % L.E. million % L.E. million %
* Subsidies:- To G.A.S.C 13,585 11.7 14,098 14.8 -513 -3.6- To petroleum materials 67,680 58.4 57,058 60.0 10,622 18.6- To electricity 6,300 5.4 0 0.0 6,300 - To exports promotion 4,000 3.5 3,014 3.2 986 32.7- To farmers 263 0.2 805 0.8 -542 -67.4- To crops 1,948 1.7 0 0.0 1,948 - To the development of Upper Egypt 200 0.2 200 0.2 0 0.0
- To industrial zones 400 0.3 400 0.4 0 0.0- To medicines and infant milks 191 0.2 182 0.2 9 4.9- To students' health insurance 230 0.2 230 0.2 0 0.0- To passenger transport 851 0.7 682 0.7 169 24.8- To soft loans interests 753 0.6 662 0.7 91 13.8- To low-income groups' housing 1,000 0.9 1,300 1.4 -300 -23.1- To water companies 750 0.6 750 0.8 0 0.0- To cinema 20 0.0 20 0.0 0 0.0- To military production 400 0.3 360 0.4 40 11.1- To internal trade infrastructure 0 0.0 500 0.5 -500 -100.0- To industrial training board 200 0.2 200 0.2 0 0.0- To students' subscriptions 500 0.4 500 0.5 0 0.0- To non-economic lines in railways 600 0.5 600 0.6 0 0.0- To rapid transit vehicles 325 0.3 325 0.3 0 - Other items 1,576 1.4 1,998 2.1 -422 -21.1
Total Subsidies 101,772 87.8 83,883 88.1 17,889 21.3* Grants 4,114 3.5 4,249 4.5 -135 -3.2* Social Benefits:* Social security pension 1,400 1.2 1,220 1.3 180 14.8* Child pension 30 0.0 30 0.0 0 0.0* Contributions to pension funds 4,100 3.5 5,000 5.3 -900 -18.0* Others 553 0.5 548 0.6 5 1.0
Total Social Benefits 6,083 5.2 6,798 7.1 -715 -10.5* Additional requirements and contingencies 3,947 3.4 241 0.3 3,706 1536.3
Total 115,916 100.0 95,172 100.0 20,744 21.8
Description
2010/2011 2009/2010
Change Growth Rate
Table No. (18)Subsidies, Grants, and Social Benefits
67
Analyzing the most important elements of subsidies, grants and social benefits, it is evident that: UI- Subsidy
a. USubsidy on Food Supplies:
In the 2010/2011 draft General Budget, the subsidy on food supplies is estimated at about EGP 13,585 m., against a projected EGP 14,098 m. in the current FY 2009/2010, with EGP 513 m. reduction, i.e. 3.6 % decrease. It is worthy of mention a program to subsidize agricultural crops has been introduced, estimated at EGP 1,948 m., which includes buying local commodities of wheat and maize from farmers at rates that exceed world rates, to encourage and support the Egyptian farmer in order to maximize agricultural production in Egypt. In case this amount is added to subsidies on food supplies, there will be an increase of EGP 1,435 m. compared to the projected for the current FY, i.e. 10.2 % increase.
The following table shows the subsidy earmarked for food supplies and its distribution among goods:
Draft Budget Quantity Expected Quantity
L.E. million (1000 tons) L.E. million (1000 tons) L.E. million %
I. Basic Commodities:1- Bread Subsidy- Imported wheat 7,616 5,871 6,625 5,900 991 15.0- Domestic wheat 2,495 2,500 2,993 2,100 -498 -16.6- Maize 424 510 688 500 -264 -38.4Total of Bread Subsidy 10,535 8,881 10,306 8,500 229 2.22- Ration oil 1,073 379 1,675 377 -602 -35.93- Sugar 1,149 757 1,434 755 -285 -19.9Total Subsidy of basic commodities
12,757 10,017 13,415 9,632 -658 -4.9
II. Additional Commodities:1- Oil 706 249 621 498 85 13.72- Sugar 780 498 604 498 176 29.13- Rice 250 997 1,244 994 -994 -79.94- Tea 27 40 49 38 -22 -44.9Total subsidy of additional commodities 1,763 1,784 2,518 2,028 -755 -30.0
Overall Subsidy 14,520 11,801 15,933 11,660 -1,413 -8.9(Less)
Total Revenues from Expenditures 935 1,835 -900 -49.0
Net Subsidy of Supply commodities 13,585 14,098 -513 -3.6
Description2010/2011 2009/2010
Change Growth Rate
Table No. (19)G.A.S.C Subsidies in
Draft Budget of FY 2010/2011
68
b. USubsidy on Petroleum Products:
In the submitted draft budget, estimates for the subsidy on petroleum products amount to around EGP 67,680 m., against EGP 33,694 m. in the 2009/2010 budget, which is expected to reach approximately EGP 57,058 m. by the end of the current FY. This increase is ascribed to the great rise in world petroleum prices, compared to estimates upon preparing the budget. The subsidy on petroleum products has been calculated according to the following:
1) A Brent Crude barrel is USD 84. The average Egyptian crude price is USD 74 per barrel. 2) Sales revenues have been calculated based on the average sale price per ton for each product in accordance with the actual for the FY 2008/2009 and the first half of the FY 2009/2010.
The following table shows the subsidy earmarked for oil products in the submitted draft:
c. USubsidy on Electricity:
The 2010/2011 draft General Budget includes EGP 6.3 bn. to cover differences in prices of petroleum products used for the power generation for previous years. Against this, there is an equal amount on the side of resources, included as part of the installments due on the electricity sector to the Public Treasury for the re-lending to the said sector.
Product Quantity Costs Sales Revenues Subsidy Percentage
(1000 tons) L.E. million L.E. million L.E. million %
Natural Gas 32,572 20,491 13,583 6,908 10.2
Butane 4,565 13,391 105 13,286 19.6
Benzene 4,486 16,245 6,272 9,973 14.7
Kerosene 156 498 134 364 0.5
Solar 11,678 41,391 9,483 31,908 47.1
Mazot 9,880 14,874 9,633 5,241 7.7
Total 63,337 106,890 39,210 67,680 100.0
Table No. (20)Petroleum Products Subsidies in
Draft Budget of 2010/2011
69
d. USupport for Promotion of Exports:
The 2010/2011 draft General Budget includes EGP 4,000 m. in support of Egyptian exports, against EGP 3,700 m. in the 2009/2010 budget, with an EGP 300 m. increase, i.e. 8.1%. It also exceeds the projected EGP 3,014 m. by EGP 986 m., i.e. 32.7 % increase, taking into account that the increase in the draft budget aims at promoting and maximizing Egyptian exports within the framework of the declared plan to quadruple the volume of exports within the next few years. It is noteworthy to mention that a portion of the above subsidy is provided through transfers to the Export Support Fund (ESF) from the Ministry of Foreign Trade and the General Organization for Export and Import Controls (GOEIC).
e. USupport of Farmers:
In line with the objectives of the State’s fiscal policy of alleviating the burdens of small farmers, the State is subsidizing agricultural production requirements: fertilizers, seeds and pesticides. The State also plays a part in combating some agricultural pests, contributes to reducing prices of seeds and offers soft loans for some agricultural purposes. In this respect, the Public Treasury bears interest spreads for these loans assigned for agricultural production. Consequently, estimates pertinent to supporting farmers, amount to EGP 263 m. in the 2010/2011 draft General Budget.
f. USubsidy on Agricultural Crops:
The 2010/2011 draft budget has introduced another subsidy represented in defining a price for purchasing local wheat that exceeds the world price by nearly EGP 600 per ton. The total subsidy is estimated at EGP 1200–1500 m. (according to the supplied amounts). The subsidy earmarked for maize should also be added, through guarantying that the supply price per ton amounts to EGP 1200 per ton, exceeding the world price by EGP 400. The subsidy, to be incurred by the State in order to prepare for receiving the maize crops, is estimated at EGP 200 m., allocated to provide the necessary dryers and scrubber for treating and storing the crops.
g. USubsidy on Transportation U:
This is represented in the subsidy provided to both Passenger Transport Authorities in Cairo and Alexandria in order to cover part of the current deficit sustained by each as a result of providing the transportation service at a lower rate than their economic cost, in consideration of low-income groups. Estimates for the subsidy for the conveyance of passengers amounts to EGP 851 m. in the 2010/2011 draft budget, with an increase of EGP 169 m., i.e. 24.8% more than the projected in the FY 2009/2010, estimated at EGP 682m.
70
h. USubsidy on Drugs and Health InsuranceU:
The State strives to exert more efforts with regards to the provision of health services in their integrated fields though upgrading performance in main utilities relevant to public health, providing more specialists in public hospitals, and ensuring that the needed medication is available to the citizen. Law No. 99 of 1992 stipulates, with respect to health insurance for students, in Article 3 that one of the sources of finance is annual subscriptions borne by the Public Treasury for each student in state-owned nurseries and schools, in addition to privately-owned, yet sponsored schools and Azhar institutes. This constitutes a direct state subsidy to every student of EGP 12 annually, accruing to roughly 19 million students. Furthermore, the subsidy provided to medications and children’s formula milk represents what the State bears of cost spreads to address losses resulting from importing medications and formula milk and selling them at prices lower than their economic cost. This subsidy is provided to the Ministry of Health, the body concerned with the matter. Estimates of the subsidy provided for medications, formula milk and health insurance in the 2010/2011 draft budget amount to EGP 421 m., with an increase of EGP 9m., compared to the projected EGP 412 m. in the FY 2009/2010.
i. USubsidy for Industrial Zones:
This subsidy is provided to the Industrial Development Authority (IDA) to pay the cost of the infrastructure of these industrial zones so that the IDA achieves its objectives in industrial development, namely to maximize the capacity of industrial zones with respect to attracting investments and encouraging inter-competition. The estimates of the subsidy for the industrial zones amount to approximately EGP 400 m. in the 2010/2011 draft budget. This has been already approved in the 2009/2010 budget.
j. USubsidy for Water Companies
The subsidy on drinking water is mainly represented in the difference between the revenues and expenditures of water companies to cover the current deficit in their budgets to cover the spread between the economic price of water and sale price in-line with the designated tariff. This is based on the decisions, upon establishment of these companies, that the Public Treasury bears the value of such difference in order to achieve the State policy of providing pure drinking water to all areas. Estimates of the subsidy for water companies amount to about EGP 750 m. in the 2010/2011 draft budget, which represents the same amount approved in the 2009/2010 budget.
71
k. USubsidy for Interest on Soft Loans:
The submitted draft plan for economic and social development includes providing EGP 1400 m. as soft loans; EGP 780 m. of which are for popular housing; EGP 200 m. soft loans to poor families; EGP 250 m. to export projects; and EGP 170 m. for miscellaneous purposes. Estimates of this subsidy amount to approximately EGP 753 m. in the 2010/2011 draft budget, with an increase of EGP 91 m. compared to the projected for the FY 2009/2010, estimated at EGP 662 m. Thus, the State bears differences of the interest rate on these soft loans, in addition to the difference of interest rates on the balances of these loans from previous years.
l. USupport for Low-Income Housing
In line with President Mubarak’s electoral program, EGP 5 bn. are provided to low-income housing for five years. In order to implement this, this subsidy has been included as of the 2006/2007 budget, in accordance with the State fiscal policy to support the low-income housing. The policy aims at providing convenient housing to the masses by providing a subsidy to every housing unit. In light of the targets of the election program, EGP 1000 m. have been earmarked for such a subsidy in the 2010/2011 draft budget.
m. USupport for the Development of Upper EgyptU:
Within the framework of the State’s continuous efforts to support the development of Upper Egypt, EGP 200 m. have been allocated for this purpose in the submitted draft budget. This is the same appropriation included in the 2009/2010 budget.
n. USubsidy on Students’ Subscriptions and Non-economic Lines in Governorates:
Within the framework of addressing the imbalance in the financing structure of the Egypt Railroads Authority as a result of its incurrence of the students’ subscriptions and of the other categories at prices lower than the actual cost and the Authority sustaining losses as a result of operating some non-economic lines in governorates, it has been decided that the Public Treasury contributes to incurring the difference between the actual cost and subsidized subscriptions for students and other groups, by an amount of EGP 500 m. It has also been taken into consideration that an amount of EGP 600 m. be entered in the draft budget for the next FY to address the losses sustained by the Authority for the operation of some non-economic lines in the governorates. Therefore, the submitted draft budget includes EGP 1100 m. to support the railroads utility in order to provide assistance to such a vital service for citizens, particularly the low-income groups.
72
o. UFinance Fund for Purchasing Speedy Transport Vehicles:
The Prime Minister’s Decision No. 470 of 2009 has been issued to establish a finance fund to purchase speedy transport vehicles. The Fund replaces old taxis with other new cars in return for paying the value of the sales tax and the customs for each car, equivalent to EGP 5000 and EGP 8000 respectively. Given that the Fund aims at replacing 25,000 taxis in the FY 2010/2011, an amount of EGP 325 m. has been included in the submitted draft (EGP 13,000 × 25,000 cars).
II-Grants, Aids and Social Benefits Appropriations for grants, aids and social benefits in the 2010/2011 draft General Budget are estimated at EGP 10,197m.,⌂37F
38 mainly representing:
1) Grants and aids provided by the State for humanitarian and social purposes are estimated at EGP 4,114 m.⌂38F
39 and allocated as follows:
In million EGP Treating citizens, patients of renal failure,
paramedics’ aids and others Aids from yields of the endowments (Awqaf) Aids to sports and youth Aids to the migrants, families of warriors, and
monthly aids to poor households and others Aids to Azhar institutes, primary students at Al-
Azhar, Qura’n recitation and memorization offices and foreign students at Al-Azhar
Treating and providing care to police officers, the retirees and their families
Aids to social care funds for employees and the Commercial Syndicate, and others
Foreign cultural relations aids and support fund for higher institutes and the Teachers Association
Fund for cultural development Fund for the Ministry of Foreign Affairs buildings Aid Fund for African countries Aid Fund for the Commonwealth countries Aviation Support Fund Fund for Mubarak public libraries Other agencies
1,572 483 380 138 77 46 395 71 12 13 80 27 462 6 397
⌂38 This figure has been amended by the Egyptian Parliament to EGP 11,197 m. when it approved the 2010/2011 State’s General Budget. ⌂39 This figure has been amended by the Egyptian Parliament to EGP 5,114 m. when it approved the 2010/2011 State’s General Budget.
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Total grants and aids 4,114⌂ 39F
40 Notice that parts of those grants and aids have counter-entries on the revenue side, like the yields of endowments and the Aviation Support Fund.
2) Social Benefits to Pension Funds and Social Security are estimated at EGP 6,083 m.⌂40F
41 constituting contributions from the State in pension funds to provide assistance to these funds to pay the designated pensions to pensioners, in addition to providing social solidarity pensions to poor households.
Furthermore, there are estimates entered for additional requirements and other aggregate appropriations, amounting to EGP 3,947 m. in the 2010/2011 draft budget, with a view to address any developments as needed, for subsidies, grants and social benefits during one year. They are allocated as follows: EGP/ Million
Contingencies to address additional requirements for food supplies 2,100
General contingencies 1,180 Assistance, urgent aids and relief 300 Total appropriations 367
Total 3,947
In the 2010/2011 draft budget, estimates relevant to the purchase of non-financial assets, “investments,” amount to around EGP 33,859 m⌂
41F
42., against EGP 36,480 m. in the 2009/2010 budget, with a decrease of EGP 2,621 m., i.e. 7.2 %. Generally, appropriations pertinent to the purchase of non-financial assets, “investments,” in the FY 2010/2011 have been distributed on the budgets of the agencies concerned as follows:
⌂40 This figure has been amended by the Egyptian Parliament to EGP 5,114 m. when it approved the 2010/2011 State’s General Budget. ⌂41 This figure has been amended by the Egyptian Parliament to EGP 6,283 m. when it approved the 2010/2011 State’s General Budget. ⌂42 This figure has been amended by the Egyptian Parliament to EGP 40,119 m. when it approved the 2010/2011 State’s General Budget.
Purchase of Non-Financial Assets, “Investments”
74
Value Relative Importance
L.E. million %
Central Administration 14,879 44
Local Administration 2,600 8
Service Authorities 15,357 45
Differential Compensation for Contractors 400 1
Contingencies 623 2
Total 33,859 100
Description2010/2011 Draft Budget
Table No. (21) Purchase of Non-Financial Assets"Investments"
75
The next table shows the distribution of investments on major components:
2010/2011Draft Budget Budget Revised
(1) (2) (3)* Building & Construction:x Residential buildings 213 116 116 97 97x Non-residential buildings 8,621 7,760 7,760 861 861x Constructions 13,114 16,314 26,314 -3,200 -13,200
Total 21,948 24,190 34,190 -2,242 -12,242* Machinery, Equipment and means of Transportation:x Means of Transport 820 498 498 322 322x Means of Transportation 161 143 143 18 18x Machinery & Equipment 6,147 6,775 6,775 -628 -628x Tools and Instruments 79 108 108 -29 -29x Fittings 948 759 759 189 189
Total 8,155 8,283 8,283 -128 -128
* Other Fixed Assets
x Animal and water resources (agricultural assets) 33 34 34 -1 -1
Total 33 34 34 -1 -1Total Fixed Assets 30,136 32,507 42,507 -2,371 -12,371
* Natural Assets:x Purchase of lands 380 427 427 -47 -47x Land Reclamation 14 14 14 0 0
Total 394 441 441 -47 -47
x Interests previous to operating 20 27 27 -7 -7
x Scholarships 607 686 686 -79 -79
x Researches and Feasibility studies for Investment projects 1,629 1,472 1,472 157 157
x Advanced payments 50 546 546 -496 -496
x Prices variations for contactors 400 300 300 100 100
x Contingencies 623 500 500 123 123
Total Investments 33,859 36,480 46,480 -2,621 -12,621
Description2009/2010 Change
(2-1) (3-1)
(L.E. million)
Table No. (22)Investments' Major Components
76
b. Classification of Expenditures in Line with Functional Classification:
Article 4 of Law No. 53 of 1973,concerning the State’s General Budget, amended by Law No. 87 of 2005, stipulates that the State’s General Budget be prepared and executed in accordance with both the economic classification of the different aspects of State activity and the administrative classification of agencies and units. Expenditures are also presented and submitted according to the functional classification of State activity. I have already submitted the expenditures in the 2010/2011 draft State’s General Budget, totaling EGP 394,494 m., ⌂ 42F
43 distributed according to the economic classification of the different aspects of State activity. Thus, the different items of the budget, of wages, purchase of goods and services, interests, subsidies, grants and social benefits, in addition to other expenses and purchase of non-financial assets (“investments”), were shown. Therefore, in compliance with the Law, it is my honor to submit to you the budget expenditures, totaling EGP 394,494 m.,⌂ 43F
44 distributed in accordance with the functional classification of the different activities of the State, of public services, the public security system, economic affairs, environment protection, housing and utilities, health, youth, culture and religious affairs, education and social protection. Tables 23 and 24 show the appropriations earmarked for the aforementioned activities, in line with the functional classification of the State activities, as included in the 2010/2011 draft General Budget compared to their counterparts in the 2009/2010 budget.
⌂43 This figure has been amended by the Egyptian Parliament to EGP 403,168 m. when it approved the 2010/2011 State’s General Budget. ⌂44 This figure has been amended by the Egyptian Parliament to EGP 403,168 m. when it approved the 2010/2011 State’s General Budget.
77
(L.E. million)2010/2011
Draft Budget Budget Revised Budget
(1) (2) (3)
* Public Services 134,437 116,028 116,678 18,409 17,759
* Public Order and Public Security Affairs 18,563 15,701 15,701 2,862 2,862
* Economic Affairs 23,494 25,191 25,191 -1,697 -1,697
* Environment Protection 1,210 1,057 1,057 153 153* Housing and Community Utilities 7,845 8,919 18,270 -1,074 -10,425
* Health 18,565 16,300 16,300 2,265 2,265
* Recreation, Culture and Religious Affairs 13,764 12,924 12,924 840 840
* Education 46,773 41,683 41,683 5,090 5,090
* Social Protection 104,448 63,283 63,282 41,165 41,166
* Various Functional Activities 25,396 22,831 22,831 2,565 2,565
Total 394,494 323,917 333,917 70,577 60,577
Functional Activities
2009/2010 Change
(2-1) (3-1)
Table No. (23)Functional Classification of Budget Expenditures
According to the State's Activities
2010/2011 2008/2009
Draft Budget Budget Revised
Budget Actual
* Public Services 17,129 12,498 90,389 4,527 3,729 6,165 134,437 116,028 116,678 82,684
* Public order and public security affairs 13,735 2,049 0 399 700 1,680 18,563 15,701 15,701 16,170
* Economic affairs 7,176 2,746 151 4,579 724 8,118 23,494 25,191 25,191 23,003* Environmental protection 343 503 0 0 0 364 1,210 1,057 1,057 1,259
* Housing and community utilities 547 226 31 21 15 7,005 7,845 8,919 18,270 18,199
* Health 8,381 4,627 20 1,645 184 3,708 18,565 16,300 16,300 15,783* Recreation, Cultural and Religious Affairs 8,548 1,393 1 1,289 323 2,210 13,764 12,924 12,924 13,807
* Education 37,699 4,225 36 170 228 4,415 46,773 41,683 41,683 39,880* Social care 1,016 62 1 103,286 1 82 104,448 63,283 63,282 118,184* Various functional activities 35 28 0 0 25,221 112 25,396 22,831 22,831 22,531
Total 94,609 28,357 90,629 115,916 31,125 33,859 394,494 323,917 333,917 351,500
2009/2010
(L.E. million)
Functional ActivitiesWages
and Salaries
Purchase of Goods
and Services
Interests
Subsidy, Grants
and Social Benefits
Other expenditures
Purchase of Non-
financial Assets,
"Investment"
Table No. (24)Expenditures by Functional Classification
of Draft Budget of FY 2010/2011
78
In the 2010/2011 draft General Budget, estimates of public revenues amount to around EGP 280,660 m.,⌂ 44F
45 against EGP 234,986 m. in the 2009/2010 budget, with an increase of EGP 45,673 m., i.e. 24.8 %. This increase comes in light of the gradual improvement in economic activity and the decline of the impacts of the global crisis. Despite the effects of the global crisis, intensive efforts are being exerted in the current FY 2009/2010 to increase public revenues. It is expected that revenues will rise in the present year from EGP 234,986 m. to EGP 258,407 m., with an increase of EGP 23,421 m. Consequently, estimates of the draft budget pertaining to revenues, estimated at EGP 280,660 m.⌂ 45F
46 compared to the projected revenues in the FY 2009/2010, estimated at EGP 258,407 m., will increase by around EGP 22,253 m., i.e. 8.6 %. This is mainly attributed to increasing tax revenues and profits pertinent to the upsurge in world prices of petroleum in addition to the boost in the revenues of the Suez Canal and corporate profits. Generally, the public revenues consist mainly of:
⌂45 This figure has been amended by the Egyptian Parliament to EGP 285,810 m. when it approved the 2010/2011 State’s General Budget. ⌂46 This figure has been amended by the Egyptian Parliament to EGP 285,810 m. when it approved the 2010/2011 State’s General Budget.
Draft Budget Weight-to-Total Expected Weight-
to-Total
L.E. million % L.E. million % L.E. million %
* Tax Revenues 197,274 70.3 171,335 66.3 25,939 15.1
* Grants 3,156 1.1 4,415 1.7 -1,259 -28.5
* Other Revenues 80,230 28.6 82,657 32.0 -2,427 -2.9
Total 280,660 100.0 258,407 100.0 22,252 8.6
Description
2010/2011 2009/2010
Change Growth Rate
Table No. (25)Public Revenues
III- Detailed Estimates of the General Revenues of the 2010/2011 Draft State’s General Budget
79
Following are the three elements or chapters that make up public revenues:
Taxes; Grants; Other revenues.
The above public revenues, estimated at EGP 280,660 m.,⌂46F
47 cover 71.1 % of the volume of public expenditures for the budget, estimated at EGP 394,494 m⌂
47F
48.
a. Tax Revenues:
Taxes are considered the most important source of financing the State’s General Budget. This is ascribed to the fact that taxes represent a real resource that contributes to financing the growing government expenditure, undertaken by the State in different fields. Tax revenues do not result in any financing burdens on the State’s Public Treasury. Furthermore, taxes constitute one of the key financial policy instruments used by the State to achieve the targets of the economic and social development plan, taking into account the social dimension of development. Tax revenues are represented by all the various collected tax revenues set by the laws and regulations that stipulate the payment of those taxes, whether general taxes, sales taxes, customs duties and taxes, or other tax revenues. Estimates of these taxes in the 2010/2011 draft budget amount to approximately EGP 197,274 m.,⌂48F
49 against EGP 145,544 m. in the 2009/2010 budget, which is expected to reach EGP 171,335 m. Therefore, estimates of the draft budget with regards to these taxes are more than the projected in the current FY by about EGP 25,939 m., representing an increase of 15.1 %.
⌂47 This figure has been amended by the Egyptian Parliament to EGP 285,810 m. when it approved the 2010/2011 State’s General Budget. ⌂48 This figure has been amended by the Egyptian Parliament to EGP 403,168 m. when it approved the 2010/2011 State’s General Budget. ⌂49 This figure has been amended by the Egyptian Parliament to EGP 200,424 m. when it approved the 2010/2011 State’s General Budget.
80
The following table traces developments in tax revenues during the previous years, compared to estimates in the new draft budget:
In this context, taxes can be divided into direct and indirect taxes as follows:
UDirect Taxes:
These are charged on earned income. Their burden cannot be transferred to others and only income-earners are affected by them. These consist in taxes on income, profits and capital gains, including individual income taxes and corporate income taxes.
UIndirect Taxes:
These are taxes charged on the disposition (i.e. use) of income. They are borne by the end consumer of goods or services. Most important of which are taxes on goods and services (the general tax on sales and services- taxes on domestic goods and imported ones- stamp tax- development tax- taxes on social solidarity- entertainment tax- international trade and customs taxes).
(L.E. million)Growth rate
over previous year%
2002/2003 68,877 55,736 9.7
2003/2004 74,663 67,147 20.5
2004/2005 79,842 75,759 12.8
2005/2006 81,607 97,779 29.1
2006/2007 105,645 114,326 16.9
2007/2008 120,824 137,195 20.0
2008/2009 166,570 163,222 19.0
2009/2010 145,544 171,335 5.0
2010/2011 197,274 197,274 15.1
Fiscal Years Estimates Actual Expected
Table No. (26)Development of Tax Revenues
81
The above statement indicates the improvement in the tax collection performance. It is evident that collection has started to improve as a reflection of the enhanced tax performance as of the FY 2005/2006.
Generally, estimates of tax revenues in the draft budget are allocated among the following basic components:
Reviewing the aforementioned components of tax revenues, it is evident that:
1. UTaxes on Income, Profits and Stamps:
General taxes on income, profits and stamp taxes constitute the main element of tax revenues. These are estimated at EGP 106,542 m., i.e. 54.0 % of total tax revenues, which amount to EGP 197,274 m.⌂49F
50 In addition, taxes on income, profits and the stamp tax represent 38.0 % of total public revenues, estimated at EGP 280,660 m⌂
50F
51. Most importantly, these taxes, estimated at EGP 106,542 m., cover around 27 % of total public expenditures, estimated at EGP 394,494 m.⌂51F
52
⌂50 This figure has been amended by the Egyptian Parliament to EGP 200,424 m. when it approved the 2010/2011 State’s General Budget. ⌂51 This figure has been amended by the Egyptian Parliament to EGP 285,810 m. when it approved the 2010/2011 State’s General Budget. ⌂52 This figure has been amended by the Egyptian Parliament to EGP 403,168 m. when it approved the 2010/2011 State’s General Budget.
(L.E. million)
2010/2011 2008/2009
Draft Budget Budget Revised Budget Expected Actual
General Taxes 106,542 71,883 71,883 93,143 89,362
Sales Tax 64,226 50,109 50,109 54,315 50,882
Customs Tax 15,500 14,018 14,018 14,057 14,091
Other Tax Revenues 11,006 9,534 9,534 9,821 8,887
Total 197,274 145,544 145,544 171,335 163,222 According to the economic classification, it is consistent with tax chapter aggregates, despite its definitional internal distribution.
Description2009/2010
Table No. (27)Components of Tax Revenues
According to the Classification ofthe Revenues Authorities
82
Taxes on income, profits and stamp taxes (general taxes) are distributed among relevant components as indicated in the following table:
2010/2011 2008/2009
Draft Budget Budget Revised
Budget Expected Actual
I. Income Tax on Natural Persons:
- Taxes on salaries, etc. 11,307 7,951 7,951 10,001 8,270- Taxes on industrial & commercial activity 5,513 4,396 4,396 4,646 4,688
- Taxes on professional & non-commercial activity 483 309 309 420 390
- Real estate tax 66 40 40 71 60- Taxes on moveable capital revenues 0 0 0 14 0
- General tax on income 2 0 0 2 2Total 17,371 12,696 12,696 15,154 13,410
II. Corporate Income Tax:- Taxes on Petroleum (EGPC) 35,765 18,453 18,453 30,387 34,135- Taxes on Suez Canal (SCA) 10,666 9,029 9,029 9,612 10,391- Central Bank Taxes (CBE) 0 152 152 0 0- Other companies Taxes 22,931 16,513 16,513 22,089 20,363
Total 69,362 44,147 44,147 62,088 64,889III. Tax on moveable Capital Revenues:
- From CBE 2,945 3,193 3,193 3,079 3,367- From Commercial Banks 97 102 102 97 97
Total 3,042 3,295 3,295 3,176 3,464IV. Stamp Tax:
- Stamp duty on salaries 1,894 1,815 1,815 1,912 874- Specific stamp duty 5,930 4,732 4,732 4,732 5,165
Total 7,824 6,547 6,547 6,644 6,039V. Other taxes:
- Social solidarity taxes 260 244 244 211 207- Taxes on bills and bonds 8,370 4,733 4,733 5,558 1,053- Other taxes 313 221 221 312 300
Total 8,943 5,198 5,198 6,081 1,560
Total of General Taxes 106,542 71,883 71,883 93,143 89,362
Description2009/2010
(L.E. million)
Table No. (28)General Taxes
83
The previous table indicates that:
Taxes on corporate income (legal persons), estimated at EGP 69,362 m⌂52F
53., constitute 65.1 % of the total estimated general taxes, which amount to EGP 106,542 m.
Corporate taxes include taxes collected on petroleum, the Suez Canal, and the rest of public and private companies.
Personal income taxes, represented in the salary tax, taxes on commercial and industrial activity, business taxes and real-estate tax, amount to EGP 17,371 m., i.e. 16.3 % of the total estimated general taxes, which amount to EGP 106,542 m.
Stamp taxes, whether salary or tax stamps, are estimated at EGP 7,824 m., i.e. 7.3 % of the total estimated general taxes, which amount to EGP 106,542 m.
Tax receipts include EGP 8,370 m., representing taxes on returns on T- bills and bonds as per law provisions. These are interests collected within tax revenues. This tax has been introduced as per Law No. 114 of 2008.
2. USales Tax:
Sales tax estimates in the 2010/2011 draft budget amount to approximately EGP 64,226 m.,⌂53F
54 against EGP 50,109 m. in the 2009/2010 budget. Nonetheless, it is expected that an amount of EGP 54,315 m. will be collected in the current year, thanks to intensive efforts exerted with regards to performance and active collection. The sales tax, targeted at EGP 64,226 m.⌂54F
55 in the draft budget, represents 32.6% of total tax revenues, which are estimated at EGP 197,274 m. This tax further constitutes 22.9 % of total general revenues, estimated at 280,660 m.⌂ 55F
56 More importantly, it covers about 16.3% of total public expenditures, estimated at EGP 394,494 m.⌂56F
57
⌂53 This figure has been amended by the Egyptian Parliament to EGP 69,392 m. when it approved the 2010/2011 State’s General Budget. ⌂54 This figure has been amended by the Egyptian Parliament to EGP 67,376 m. when it approved the 2010/2011 State’s General Budget. ⌂55 This figure has been amended by the Egyptian Parliament to EGP 67,376 m. when it approved the 2010/2011 State’s General Budget. ⌂56 This figure has been amended by the Egyptian Parliament to EGP 285,810 m. when it approved the 2010/2011 State’s General Budget. ⌂57 This figure has been amended by the Egyptian Parliament to EGP 403,168 m. when it approved the 2010/2011 State’s General Budget.
84
The following table shows the key types of sales tax:
3. UTaxes and Customs Duties:
In the 2010/2011 draft General Budget, taxes and customs duties are estimated at about EGP 15,500 m., against EGP 14,018 m. in the 2009/2010 budget, which is expected to rise to EGP 14,057 m. This means that estimates of the draft budget will rise more than expected in the current FY by about EGP 1,443 m., i.e. almost 10.3 %. Generally, taxes and customs duties in the draft budget, estimated at EGP 15,500 m., constitute 7.9 % of total tax revenues, amounting to EGP 197,274m.
2010/2011 2008/2009
Draft Budget Budget Revised
Budget Expected Actual
* General Sales Tax:
Taxes on domestic goods ـ 13,994 9,689 9,689 11,632 9,542
- Taxes on imported goods 20,372 15,557 15,557 17,166 18,063
Total 34,366 25,246 25,246 28,798 27,605
* Taxes on goods in Table (1):
(Domestic & imported)
- Cigarettes & Tobacco 8,454 7,015 7,015 7,320 6,689
- Petroleum Products 8,605 7,587 7,587 8,035 6,991
- Others 1,138 1,384 1,384 1,079 794
Total 18,197 15,986 15,986 16,434 14,474
* Taxes on Services:- International & Local Telecommunication Services 2,933 2,276 2,276 2,276 2,211
- Operation Services for others 3,343 2,646 2,646 2,727 2,582- Services provided in Tourist Hotels and Restaurants 4,552 3,624 3,624 3,747 3,684
- Other Services 835 331 331 333 326
Total 11,663 8,877 8,877 9,083 8,803
Total General Sales Tax 64,226 50,109 50,109 54,315 50,882
Description2009/2010
(L.E. million)
Table No. (29)General Sales Tax
85
Furthermore, taxes and customs duties represent 5.5 % of total public revenues, estimated at EGP 280,660 m⌂
57F
58. More importantly, these cover about 3.9 % of total public expenditures, estimated at EGP 394,494 m.
The following table indicates estimates of taxes and custom duties:
Customs duties, they should not be simply regarded as receipts even if they constitute a meager percentage of public revenues and a small contribution in covering public expenditures, the view of custom duties should be extended to include their economic impact. Customs duties are one of the key financial policy instruments used in national economy management. Moreover, they contribute to increasing production, bolstering national industries and realizing fair competitive protection.
⌂58 This figure has been amended by the Egyptian Parliament to EGP 285,810 m. when it approved the 2010/2011 State’s General Budget.
2010/2011 2008/2009
Draft Budget Budget Revised
Budget Expected Actual
* Taxes on Imports:
- Valued customs Taxes (other than petroleum) 12,792 12,161 12,161 11,340 11,725
- Customs duties on petroleum products 1,717 1,227 1,227 1,483 1,339
Total 14,509 13,388 13,388 12,823 13,064
- Taxes on imported cigarettes & tobacco 469 440 440 450 432
Total Taxes on Imports 14,978 13,828 13,828 13,273 13,496
* Taxes on International Trade:
- Taxes on Exports 349 0 0 578 461
- Customs Taxes to Promote Maritime Transport 28 28 28 28 0
- Revenue from fines 100 126 126 138 95
- Revenue from seizures 45 36 36 40 39
Total Taxes on International Trade 522 190 190 784 595
Total Customs Taxes 15,500 14,018 14,018 14,057 14,091
Description2009/2010
(L.E. million)
Table No. (30)Taxes and Customs Duties
86
Thus, the steps taken to reform customs duties and structure customs tariffs, as of 2004, the latest of which being the amendments issued as per Presidential Decree No. 51 of 2009, have restructured customs tariffs to help save part of the burden incurred by producers and exporters, who use intermediary goods in their production and promote exports, in addition to controlling and regulating the traffic of imports. Furthermore, a cooperation protocol has been signed with China pertinent to the exchange of information on the real values of goods and the consequent undermining of invoice forgery.
4. UOther Tax Revenues:
Other tax revenues complement the rest of the above tax system. Other tax revenues are estimated at EGP 11,006 m. in the 2010/2011 draft General Budget, against EGP 9,534 m. in the 2009/2010 budget, which is expected to amount to EGP 9,821 m. Therefore, estimates of other tax revenues, in the 2010/2011 draft General Budget, amounting to EGP 11,006 m. surpass those the projected in the FY 2009/2010 by about EGP 1,186 m., an increase of 12.1 %. Other tax revenues in the draft budget represent 5.6 % of total tax revenues, estimated at EGP 197,274 m.⌂58F
59 They also represent 3.9 % of total public revenues in the draft budget, estimated at EGP 280,660 m⌂
59F
60. Other tax revenues cover public expenditures, which are estimated at EGP 394,494 m.,⌂60F
61 by only 2.8 %.
⌂59 This figure has been amended by the Egyptian Parliament to EGP 200,424 m. when it approved the 2010/2011 State’s General Budget. ⌂60 This figure has been amended by the Egyptian Parliament to EGP 285,810 m. when it approved the 2010/2011 State’s General Budget. ⌂61 This figure has been amended by the Egyptian Parliament to EGP 403,168 m. when it approved the 2010/2011 State’s General Budget.
87
The following table shows the distribution of Other Tax revenues:
b. UGrants:
Grants are non-obligatory transfers received by government units from three main sources: foreign governments, international organizations and government units in the general government sector. Grants are classified according to the nature of the activity financed as current grants and capital grants. The 2010/2011 draft General Budget estimates grants to reach around EGP 3,156 m.,⌂61F
62 divided into current, and investment and capital grants. This estimate stands against EGP 7,700 m. in the 2009/2010 budget, which is expected to amount to EGP 4,415 m.
⌂62 This figure has been amended by the Egyptian Parliament to EGP 5,156 m. when it approved the 2010/2011 State’s General Budget.
2010/2011 2008/2009
Draft Budget Budget Revised
Budget Expected Actual
* Resources Development Fees 4,163 3,850 3,850 3,876 3,626
* Royalties on Suez Canal 1,408 1,197 1,197 1,270 1,231
* Fees on Consular Procedures 1,000 890 890 932 842
* Fees on Ports and Lighthouses 891 788 788 771 726
* Land Tax 518 296 296 296 278
* Buildings Tax 608 338 338 405 334
* Property Transferring Fees 680 669 669 595 546
* Crossing Fees (Somid) 456 456 456 456 240
* Administrative Expenses of Imports Processes 418 416 416 423 398
* Fees on Work Permits 140 137 137 136 110
* Other Tax Revenues 725 497 497 661 556
Total 11,006 9,534 9,534 9,821 8,887
Description2009/2010
(L.E. million)
Table No. (31)Other Tax Revenues
88
Thus, in the draft budget grants are estimated at EGP 3,156 m.,⌂62F
63 which is less than the projected in the fiscal 2009/2010 by about EGP 1,259 m., representing a decline of 28.5 %. These grants constitute 1.1 % of total public revenues, amounting to EGP 280,660 m.⌂63F
64 These also cover 0.8 % of total public expenditures, estimated at EGP 394,494 m.⌂64F
65
c. UOther Revenues:
Estimates of other revenues (excluding tax revenues and grants) in the draft General Budget of the FY 2010/2011 amount to about EGP 80,230 m., compared to EGP 81,742 m. in the amended budget of the FY 2009/2010, with a decline of EGP 1,512 m. However, it is expected that the revenues of the current year will rise to EGP 82,657 m. Therefore, the decrease in the estimates of the 2010/2011 draft budget, compared to the projected in 2009/2010, will be around EGP 2,427 m., i.e. 2.9 % decrease. Other revenues, estimated in the draft budget, at EGP 80,230 m., represent around 28.6 % of the volume of public revenues, which amount to EGP 280,660 m. These also cover about 20.3 % of the volume of public expenditures, amounting to EGP 394,494 m⌂
65F
66. Generally, other revenues are mainly concentrated in surpluses of petroleum, the Suez Canal and other economic authorities, in addition to public companies’ profits and some other non-tax revenues as indicated in the following table:
⌂63 This figure has been amended by the Egyptian Parliament to EGP 5,156 m. when it approved the 2010/2011 State’s General Budget. ⌂64 This figure has been amended by the Egyptian Parliament to EGP 285,810 m. when it approved the 2010/2011 State’s General Budget. ⌂65 This figure has been amended by the Egyptian Parliament to EGP 403,168 m. when it approved the 2010/2011 State’s General Budget. ⌂66 This figure has been amended by the Egyptian Parliament to EGP 403,168 m. when it approved the 2010/2011 State’s General Budget.
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2010/2011 2008/2009
Draft Budget Budget Revised
Budget Expected Actual
* Petroleum Surplus 25,099 10,802 10,802 20,232 21,637* Suez Canal Surplus 14,033 11,830 11,830 12,631 13,573* Other Economic Authorities Surplus 2,661 2,938 2,938 1,500 1,245
* Corporate Profits 5,316 5,609 5,609 4,902 3,894
* CBE Surplus 805 228 228 700 0* Available Resources for Financing Investments 7,599 3,049 3,049 3,967 7,855
* Revenues from Special Funds and Accounts 9,359 8,347 8,347 9,233 11,468
* Judicial Fees and Fines 1,501 1,090 1,090 1,290 1,048* Return for Government Services 2,794 2,549 2,549 2,945 2,241
* Collected Interests 1,953 6,102 6,102 5,901 4,849* Royalties on Petroleum 2,192 1,477 1,477 2,099 3,662* Differences in Gas Prices 1,200 1,200 1,200 1,200 1,415* Other from EGPC 0 6,000 6,000 178 3,700* Returns from Mobile phone licenses
1,100 2,350 2,350 2,300 0
* Returns from Cement & Steel Licenses
180 0 0 0 654
* Proceeds from the sale of urban communities' lands
150 0 10,000 10,000 1,500
* Profits of wheat guarantees 495 0 0 0 500
* Actuarial surpluses of insurance funds
0 0 0 0 24,344
* Proceeds from securitization of land sale bonds 0 5,000 5,000 0 0
* Others 3,793 3,173 3,173 3,577 7,713
Total 80,230 71,743 81,743 82,657 111,299
Description2009/2010
(L.E. million)
Table No. (32)Other Revenues
90
Chapter Five Key Financial Balances of the 2010/2011 Draft State’s General Budget Mr. Speaker of the People's Assembly, Ladies and Gentlemen, Members of the Esteemed Assembly, In the context of the aforementioned analysis of elements of both expenditures and revenues of the 2010/2011 draft State’s General Budget, the picture can now be made clear as to how financial balance can be realized in the State’s General Budget: EGP/ Million
Expenditures: Expenditures in the State’s General Budget consist of wages, purchase of necessary goods and services, interests on loans, subsidy, grants and social benefits, other expenses and the purchase of non-financial assets, “investments.”
394,494⌂ 66F
67
Revenues: Revenues, in the State’s General Budget, consist of: tax revenues, available grants, non-tax revenues of surpluses and profits, and revenues from services offered by the State and others.
280,660⌂ 67F
68
Budgetary Cash Deficit: It results from the inability of available revenues to cover public expenditures; a gap that represents a cash deficit in the State’s General Budget.
113,834⌂ 68F
69
Net Acquisition of Financial Assets: This represents what is paid by the Public Treasury of contributions or what it lends, minus what it collects of revenues due on such holdings as payment of loan installments.
-8,282
Overall Budgetary Deficit: It represents the cash deficit of the budget, plus or minus net acquisition of financial assets. This deficit requires searching for sources of finance.
105,552⌂ 69F
70
⌂67 This figure has been amended by the Egyptian Parliament to EGP 403,168 m. when it approved the 2010/2011 State’s General Budget. ⌂68 This figure has been amended by the Egyptian Parliament to EGP 285,810 m. when it approved the 2010/2011 State’s General Budget. ⌂69 This figure has been amended by the Egyptian Parliament to EGP 117,358 m. when it approved the 2010/2011 State’s General Budget. ⌂70 This figure has been amended by the Egyptian Parliament to EGP 109,076 m. when it approved the 2010/2011 State’s General Budget.
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Given the analysis of the different components of expenditures and revenues, the other related elements, meant to realize the financial balance of the State’s General Budget, should also be analyzed. These include:
Budgetary cash deficit; Net acquisition of financial assets; Overall budget deficit; Measures to finance deficit in the State’s General Budget; Public debt position.
UI. Budgetary Cash Deficit:
The cash deficit shown in the 2010/2011 draft State’s General Budget represents the gap between the volume of expenditures in this budget and available revenues. Such a gap, estimated in the draft budget at approximately EGP 113,834.1 m.,⌂70F
71 represents 8.2 %⌂
71F
72 of target GDP for this FY. It is a deficit that shows that the State’s public revenues fell short of covering public expenditures. Therefore, the cash deficit in the State’s General Budget, even though relevant to operations and inevitabilities to which the State is committed -particularly wages, subsidies, social benefits, education expenses, health, in-kind investments, and public debt interests- necessitates the pursuit of revenues that secure the reduction of such cash deficit; or an endeavor to rationalize public expenditure itself. These measures have their risks; nonetheless, they are necessary to reduce the need for new loans and to decrease public debt. UII. Net Acquisition of Financial Assets:
As per international financial rules, the acquisition of financial assets (excluding restructuring contributions), represented in the State’s equity in authorities, companies and others, in addition to the State’s lending to others, constitutes an additional burden added to the cash deficit of the State’s General Budget. On the other hand, the generated revenues and receipts (without the privatization proceeds) are excluded from the cash deficit. Net acquisition of financial assets represents both the receipts from acquisition of financial assets in addition to the revenues generated. In the 2010/2011 draft General Budget, this is estimated at EGP 8,282 m., against EGP 730 m. in the 2009/2010 budget.
⌂71 This figure has been amended by the Egyptian Parliament to EGP 117,358 m. when it approved the 2010/2011 State’s General Budget. ⌂72 This figure has been amended by the Egyptian Parliament to 8.5% when it approved the 2010/2011 State’s General Budget.
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The following table illustrates the main elements under the “Acquisition of Financial Assets” after excluding the Privatization Proceeds and treasury contributions in the “Restructuring Fund”:
UIII- Overall Budget Deficit: In light of the above, adding the net acquisition of financial assets to the cash deficit of the State’s General Budget computes the overall deficit. This is estimated in the 2010/ 2011 draft General Budget at EGP 105,551.5 m.,⌂72F
73 against EGP 98,698 m. projected in the FY 2009/2010, with an increase of EGP 6,853.5 m.,⌂ 73F
74 i.e. 6.9 %.⌂74F
75 The overall deficit, in the submitted draft budget, represents 7.7 % of GDP, as evident in the following table:
⌂73 This figure has been amended by the Egyptian Parliament to 109,076 m. when it approved the 2010/2011 State’s General Budget. ⌂74 This figure has been amended by the Egyptian Parliament to 10,378 m. when it approved the 2010/2011 State’s General Budget. ⌂75 This figure has been amended by the Egyptian Parliament to 7.9% when it approved the 2010/2011 State’s General Budget.
(L.E. million)2010/2011
Draft Budget Budget Revised
(1) (2) (3)
Acquisition of Financial Assets:
* Basically, it is represented in contributions to authorities & enterprises and lending some entities
4,240 3,562 3,562 678 678
Excluding:* Contribution in Restructuring Fund
250 0 0 250 250
Net 3,990 3,562 3,562 428 428
Acquisition of financial Assets receipts:* It is represented in the collected installments from loans and proceeds from the sale of some financial assets & equities
12,772 2,832 2,832 9,940 9,940
Excluding:* Privatization receipts 500 0 0 500 500
Net 12,272 2,832 2,832 9,440 9,440
Net Acquisition -8,282 730 730 -9,012 -9,012
Description2009/2010 Change
(2-1) (3-1)
Table No. (33)Net Acquisition of Financial Assets
93
UIV-Measures for Financing the Overall Budget Deficit:
The gap between the General Budget expenditures and revenues, in addition to the net acquisition of financial assets, results in the overall deficit of the State’s General Budget. This deficit necessitates seeking and covering sources of financing. In this respect, it is incumbent to distinguish between two key issues: First: Total financing required for the General Budget is not confined to the overall deficit of the State’s General Budget, estimated at EGP 105.552 m.⌂ 75F
76 in the draft budget. It extends to seeking sources of finance to cover domestic and foreign loan installments, estimated at EGP 82,250 m. in the submitted draft budget. Second: Net borrowing constitutes the real increase in public, Domestic and Foreign Debt. Domestic and foreign loan installments should be excluded from new financing needs as reductions of public debt balances for previous years.
⌂76 This figure has been amended by the Egyptian Parliament to 109,076 m. when it approved the 2010/2011 State’s General Budget.
(L.E. million)
2010/2011 2008/2009
Draft Budget BudgetRevised Budget
Expected Actual
* Expenditures 394,494 323,917 333,917 356,372 351,500
* Revenues 280,660 224,986 234,986 258,407 282,504
Cash Deficit 113,834 98,931 98,931 97,964 68,995
Net Acquisition of Financial Assets
-8,282 730 730 733 2,831
Overall Deficit 105,552 99,660 99,660 98,698 71,826
GDP 1,378,000 1,181,000 1,181,000 1,198,000 1,038,600
Revenues as a percentage of GDP
20.4% 19.1% 19.9% 21.6% 27.2%
Expenditures as a percentage of GDP
28.6% 27.4% 28.3% 29.7% 33.8%
Cash Deficit as a percentage of GDP
8.3% 8.4% 8.4% 8.2% 6.6%
Overall Deficit as a percentage of GDP
7.7% 8.4% 8.4% 8.2% 6.9%
Description2009/2010
Table No. (34)Overall Deficit
94
Accordingly, net borrowing required by the budget in the next fiscal year 2010/2011, amounts to approximately EGP 105,302 m., ⌂76F
77 against a projected EGP 98,282 m. in the FY 2009/2010, with an increase of EGP 7,020 m., as shown in the following table:
UV- Position of the Domestic and Foreign Public Debt: The State’s General Budget deficit is certainly one of the main reasons conducive to increasing the volume of public debt. The submitted 2010/2011 draft General Budget includes an overall deficit of approximately EGP 105.5 bn., which necessitates borrowing to cover the deficit; leading to an increase in public debt.
⌂77 This figure has been amended by the Egyptian Parliament to 108,826 m. when it approved the 2010/2011 State’s General Budget.
(L.E. million)
2010/2011 2008/2009
Draft Budget Budget Revised Budget Expected Actual
Overall Deficit 105,552 99,660 99,660 98,698 71,826
(Plus)
Payment of Domestic & Foreign Loans Installments 82,250 27,158 27,158 27,350 18,313
Total Financing 187,802 126,818 126,818 126,047 90,139(Excluding)
Reduction in Public Debt by the Installments paid 82,250 27,158 27,158 27,350 18,313
Net Privatization Proceeds 250 0 0 415 183
Net Borrowing 105,302 99,660 99,660 98,282 71,644
(L.E. million)
2010/2011 2008/2009
Draft Budget Budget Revised Budget Expected Actual
- Financing by Issuance of Bills & Bonds 187,487 123,352 123,352 125,379 88,634
- Borrowing from Foreign Sources 65 3,450 3,450 243 1,237
- Borrowing from other Sources 0 16 16 10 85
- Net Privatization Proceeds 250 0 0 415 183
Total Financing Sources 187,802 126,818 126,818 126,047 90,139
Description2009/2010
It has been taken into account in the draft budget that the provision of financing sources required for either coverage of overall deficit or repayment of the due loans installments will be from the following financing sources:
Description2009/2010
Table No. (35)Net Borrowing & Financing Sources
95
Despite the great challenges facing our national economy, particularly with the effects of the global financial crisis and its impacts on our public revenues and national income, the biggest challenge for the financial policy remains to have the ability to minimize Domestic and Foreign Public Debt relative to the GDP. This challenge is accentuated with the difficulties faced by the government with regards to reducing the volume of public expenditure, usually pertinent to inevitable popular requirements, such as wages, subsidies, grants, social benefits or investments necessary to drive the wheel of economic and social development and. Even though public debt is usually measured economically through three levels: debt of the budgetary entities and agencies, government debt and the State public debt, the first level, debt of the budgetary agencies, remains a major influence in public debt measurements. Therefore, the financial policy implemented by the MOF is keen on limiting the relative increase in this debt in order to avoid the impact on national income, to minimize the burdens resulting from debt servicing and to reduce the present and next generations' share of that debt. The following table demonstrates development of net public debt of the budgetary units and agencies (i.e. total debt of these agencies minus bank deposits) relative to GDP:
Therefore, in view of the above statement, it is clear that the volume of Domestic and Foreign Debt of the budgetary agencies is decreasing annually. Its ratio to GDP was 73.8 % in 2006/2007 and it is gradually decreasing. It is expected to drop to 65.8 %
Domestic Debt Foerign Debt Total Percent of
Domestic DebtPercent of
Foreign Debt
Percent of Domestic and Foreign Debt
L.E. million L.E. million L.E. million L.E. million % % %
2006/2007 478,172 71,575 549747 744,800 64.2 9.6 73.8
2007/2008 478,699 145,752 624451 895,500 53.5 16.3 69.7
2008/2009 562,326 143,145 705471 1,038,600 54.1 13.8 67.9
634,767 141,925 776692 1,181,000 53.8 12.0 65.8
(Targeted Annual GDP)
Public Debt of Budget Entities
GDP
Percent of Net Debt to GDP
First Half of 2009/2010
Fiscal Years
Table No. (36)Development of Net Public Debt
96
by the end of June 2010, 53.8 % of which will be attributed to domestic debt and 12.0 % to foreign debt. Taking into consideration not only the first level of domestic debt measure (debt of the agencies of the General Budget), but also the second, described as the general government debt (includes debt of NIB and insurance funds in addition to debt agencies of the General Budget) as well as the third level, defined as the public debt (including debt of the economic authorities), it is noticeable that there is a relative decrease in the volume of this public debt to the GDP, having excluded intertwined relations among these agencies to reach the total of that debt and then deduct, on one hand, deposits relevant to each of these agencies, on the other hand, in order to reach the net domestic debt. Government external public debt, for which the MOF is liable and committed to serve, is expected to amount -by the end of June 2010- to about USD 25.8 bn. (equivalent to EGP 141,925 m.). Adding that to net domestic public debt expected at the end of June 2010, net Domestic and Foreign Public Debt expected at the end of June 2010 amounts to approximately EGP 691015 m., at 58.5 % of GDP, as shown in the following table:
97
(L.E. million)
End of June End of June End of June End of June 2010
2007 2008 2009 ExpectedGross Domestic Debt:
Gross Domestic Debt of Budget Entities 591,001 599,603 699,667 777,438
Gross Domestic Debt of General Government 486,241 513,008 615,875 695,635
Gross domestic Public Debt 493,879 537,559 643,654 724,334
Net Domestic Debt:
Net Domestic Debt of Budget Entities 478,172 478,699 562,326 634,767
Net Domestic Debt of General Government 369,277 381,965 467,065 536,547
Net Domestic Public Debt 363,274 387,058 475,922 549,090
Government Foreign Debt 71,575 145,752 143,145 141,925
Net Domestic & Foreign Debt:Net Domestic & Foreign Debt of Budget Entities 549,747 624,451 705,471 776,692
Net Domestic & Foreign Debt of General Government 440,852 527,717 610,210 678,472
Net Domestic & Foreign Public Debt 434,849 532,810 619,067 691,015
GDP 744,800 895,500 1,038,600 1,181,000
Gross Domestic Debt of Budget Entities as a percent of GDP 79.4% 67.0% 67.4% 65.8%
Gross Domestic Debt of General Government as a percent of GDP 65.3% 57.3% 59.3% 58.9%
Gross Domestic Public Debt as a percent of GDP 66.3% 60.0% 62.0% 61.3%
Net Domestic Debt of Budget Entities as a percent of GDP 64.2% 53.5% 54.1% 53.7%
Net Domestic Debt General Government as a percent of GDP 49.6% 42.7% 45.0% 45.4%
Net Domestic Public Debt as a percent of GDP 48.8% 43.2% 45.8% 46.5%
Foreign Debt as a percent of GDP 9.6% 16.3% 13.8% 12.0%Net Domestic & Foreign Debt of Budget Entities as a percent of GDP 73.8% 69.7% 67.9% 65.8%
Net Domestic & Foreign Debt of General Government as a percent of GDP
59.2% 58.9% 58.8% 57.4%
Net Domestic & Foreign Public Debt as a percent of GDP 58.4% 59.5% 59.6% 58.5%
Description
Table No. (37)Development of Domestic & Foreign Public
Debt
98
It is evident from the presented statement that the public debt to which the government is committed, whether in its total or net form, and whether it is limited to agencies of the General Budget, government debt or the State’s public debt, even though increasing as an absolute number, is decreasing annually in its ratio to the GDP. This stresses the fact that public debt is acting normally and that its burden is decreasing annually in relation to GDP on the national level. There is no state that does not borrow; what is important to keep in mind is that these borrowings not exceed the growth rate in GDP. As long as there is a relative decrease in the ratio of this debt to GDP, this represents sound progress.
99
Chapter Six The 2010/2011 Public Treasury Draft Budget According to provisions of the State’s General Budget Law No. 53 of 1973 and its amendments, the State’s Public Treasury budget is prepared in accordance with international standards. It presents the following:
Cash deficit or surplus; Overall deficit or surplus; Sources of financing the overall deficit; Financing deficit in the budgets of the budgetary entities and agencies,
to which the surpluses of these agencies are transferred.
The following two tables demonstrate that:
I. The overall picture of the Public Treasury Budget and what is shows from cash and overall deficits, in addition to sources of financing and the deficit to be financed by the Public Treasury.
II. The general outcomes of the State’s General Budget as illustrated in the Public Treasury Budget.
100
Central Administration
Local Administration
Service Authorities Total
# Revenues - Taxes 195,669 840 765 197,274 145,544 - Grants 2,768 17 371 3,156 7,700 - Other Revenues 62,703 4,165 13,362 80,230 81,743
Total Revenues 261,140 5,022 14,498 280,660 234,986# Expenditures
- Wages and Compensation of Employees 39,065 44,166 11,378 94,609 87,485
- Purchase of Goods and Services 15,878 6,805 5,674 28,357 27,349 - Interests 90,332 212 85 90,629 71,066 - Subsidy, Grants and Social Benefits 109,963 297 5,656 115,916 73,480 - Other Expenditures 29,893 102 1,130 31,125 28,058 - Purchase of non-Financial Assets "Investments" 15,902 2,600 15,356 33,858 46,480
Total Expenditures 301,033 54,182 39,279 394,494 333,917Cash Deficit (Surplus) 39,893 49,160 24,781 113,834 98,931
# Net Acquisition of Financial Assets
- Receipts from borrowing and sales of assets (excluding privatization) 12,271 0 1 12,272 2,832
- Acquisition of domestic and foreign financial assets (excluding treasury contribution in structure fund)
3,908 0 82 3,990 3,562
Net Acquisition of Financial Assets -8,363 0 81 -8,282 730
Overall Deficit (Surplus) 31,530 49,160 24,862 105,552 99,661
# Financing Sources of Overall Deficit:
Borrowing and Issuance of Domestic Securities* Issuance of Securities other than Share to fund Budgets' Deficit 112,930 49,358 25,199 187,487 123,352
. Borrowing from other Sources 0 0 0 0 16Gross Borrowing & Issuance of
Domestic Securities 112,930 49,358 25,199 187,487 123,368
Borrowing and Issuance of Foreign Securities. To finance Investments 29 0 36 65 3,450Gross Borrowing & Issuance of Foreign Securities
29 0 36 65 3,450
Total Borrowing & Issuance of Securities other than shares 112,959 49,358 25,235 187,552 126,818
- Excluding Payment of Domestic & Foreign Loans 81,679 198 373 82,250 27,158
Net Borrowing & Issuance of Securities other than shares 31,280 49,160 24,862 105,302 99,660
- Plus Net Privatization Proceeds 250 0 0 250 0
Net Financing Sources 31,530 49,160 24,862 105,552 99,660
Budget of FY
2009/2010 (revised)
DescriptionDraft Budget of FY 2010/2011
(L.E. million)
Table No. (38)Public Treasury Budget
Summary of Budget Sector Operations
101
(L.E. million)
Draft Budget
Draft Budget
Draft Budget
2010/2011 2010/2011 2010/2011
Total Expenditures 394,494 333,917 Total Revenues 280,660 234,986 Cash Deficit 113,834 98,930
Acquisition of domestic and foreign
financial assets (excluding treasury
contributions in restructure fund)
3,990 3,562
Receipts from lending and sales of
asset (excluding
privatization proceeds)
12,272 2,832
Net Acquisition of financial
assets
-8,282 730
Total expenditures and acquisition of
financial assets398,484 337,479
Total revenues and
lending receipts
292,932 237,818 Overall deficit 105,552 99,660
Repayment of domestic and foreign
loans82,250 27,158 Borrowing 187,552 126,818 Net
Borrowing 105,302 99,660
Treasury contributions in restructure fund
250 0 Privatization Proceeds 500 0
Net Privatization
Proceeds250 0
Total 480,984 364,636 Total 480,984 364,636 0 0
Revised Budget
2009/2010
Revised Budget
2009/2010
Revised Budget
2009/2010
Uses Resources Outcomes
Description Description Description
Table No. (39)Public Treasury Budget Overall
Results of the State General Budget
102
Chapter Seven The 2010/2011 Draft Budget in Accordance with the Gender-Responsive Program and Performance Budget Mr. Speaker of the People's Assembly, Ladies and Gentlemen, Members of the Esteemed Assembly, The developments in Egyptian economy, increasing openness to the outside world and foundations of the modern financial management, have resulted in the introduction of some essential amendments to Law No. 53 of 1973, concerning the compatibility of the State’s General Budget with international variables and for the budget to be prepared and executed in accordance with international classifications and standards. In light of the above, your esteemed Assembly has approved Law No. 87 of 2005 to amend the State’s General Budget Law No. 53 of 1973. Article IV of the latter stipulates that "the State’s General Budget shall be prepared and executed in accordance with the economic classification of aspects of the State activity and administrative classification of agencies and entities. Expenditures shall be submitted to the People's Assembly in line with the functional classification of the State activities, taking into consideration that analysis shall be conducted based on programs, projects and businesses, within a period of maximum five years as of effective date of that Law." To this end, the MOF has conducted a survey of the strategic objectives of the different ministries and agencies in light of initiating laws and resolutions, in addition to the main and secondary programs and activities implemented by these agencies to realize these objectives included in the State’s general plan. Financial appropriations entered in the 2010/2011 draft budget have been analyzed as gender-responsive program budgeting. This issue is still preliminary given that this requires more auditing phases in the form of indicators to measure performance and to secure that deviations can be redressed early in order to reach a program and performance budget. It also necessitates consorted efforts among the agencies concerned and the interaction of some other agencies with a view to preparing the budgets of these agencies in a proper way that reflects reality. This financial analysis included the allocation of appropriations among programs and activities in light of the 2010/2011 general plan for most of the agencies included in the State’s General Budget as shown in the following table:
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It should be taken into consideration that financial appropriations earmarked for some agencies have been excluded as a result of their specificity, including the following budgets:
Draft budget of the Public Reserves Section. Draft budget of the Public Debt Section. Draft budget of the Loans and Contributions Section. Draft budget of the Subsidy and Reduced Costs of Living Section. Draft budget of Net Pension Burdens Section.
Services provided by the budgetary agencies can be divided into:
Public services and central agencies; Presidential services; Supply and trade services; Manpower and immigration services; Agriculture, veterinary and irrigation services; Electricity, industry and energy services; Roads, transportation and communication services; Housing and societal utilities services; Health services; Youth, culture and religion services; Education services; Social services and women; Money and international trade services.
Description Budget Entities
Entities whose allocations were distributed
according to performance and programs budget
Percentage (%)
Central Administration 157 14491.7
Local Administration 347 347100.0
Service Authorities 151 151100.0
Total 655 642 98.0
Table No. (40) Entities whose Allocations were Distributed according to Performance and
Programs Budget
104
Conclusion Mr. Speaker of the People's Assembly, Ladies and Gentlemen, Members of the Esteemed Assembly, The above presentation for the 2010/2011 draft State's General Budget has included all governing aspects and foundations on which estimates of the draft budget have been based, whether with regard to public expenditures or revenues. Thus, the above draft budget has covered the following points:
Estimates of appropriations of public expenditure in the General Budget, including details of components of operating expenses and investments, including their affects on the development path.
Estimates of public revenues of the General Budget, taking into consideration compatibility between the capacity of the tax community and the scientific foundations concerning collection of rights of the Public Treasury in accordance with effective governing regulations.
Clarifying the State’s General Budget deficit and its effect on public debt. Furthermore, financing needs have been identified, highlighting the gap between budget expenditures and revenues. Methods of financing have been explored with keenness on providing the appropriations necessary for inevitabilities to which the State is committed, mainly wages, subsidies, pensions, investments and others.
As we present the State’s General Budget, it is important that we stress coordination and integration between the financial policy and the monetary policy. Both are essential to realize the discipline necessary for economic performance, control of inflation, stability of exchange rates, fine-tuning of the financial performance of the State’s General Budget and provision of financing needs in a rational framework. Now I submit the 2010/2011 draft General Budget, inclusive of all details necessary for discussion, consultation and exchange of views with the Members of the esteemed Assembly, within a framework of full transparency. I am confident that this represents the best and most expedient way of communicating with the distinguished Representatives of the esteemed Assembly, with a view to realizing the advancement of this nation, driving the wheel of economic development, and achieving social justice. Thank you.