table of contents - الصفحه...

Table of contents

Page

Chapter one: The economic stance & Challenges of the current phase 9 First : the global economic stance 9

Second : the domestic economic stance and the phase challenges 20

Chapter Two : The aggregates Of the State’s General Budget

For the Fiscal year 2012/2013 25

First : analyzing expenditures 26

Second : analyzing revenues 31

Chapter Three : The bases for estimates of uses and resources of the State’s General Budget draft for the fiscal year 2012/2013 36

First- the basic estimates of the fiscal aggregates of the State’s General Budget 40

second - the detailed estimates of the public expenditures -

of the State’s General Budget 52

third- the detailed estimates of the public revenues . 85

Chapter Four: Social Dimension in Draft of the General State's Budget

For fiscal year 2012/2013. 104

Chapter Five: The Basic Fiscal equilibrium For the Draft Budget

In the Fiscal Year 2012/2013 109

First: The cash deficit. 110

Second: Net Acquisition of the Financial Assets. 111

Third: The Overall Deficit of the Budget. 113

Fourth: Measures to Finance the Overall Deficit. 115

Fifth: Position of Domestic and Foreign Public Debt. 117

Chapter Six: The Public Treasury Budget Draft for FY 2012/2013 123

Chapter Seven: Orientations of the fiscal policy

at the medium term 126

- Highly prioritized measures within the medium term 127

- The budget and the debt estimates during the next three years 130

Chapter eight: The relations with the economic authorities 133

Conclusion 138

Tables index

Data table number page

Development of the world GDO growth rates 1 11 Development of the world prices for selected major commodities 2 19 Major indicators of the macroeconomic performance 3 24 Draft budget for the fiscal year 2012/2013 4 34 Aggregates of the State’s General Budget 5 35 Uses and sources of the state’s general budget 6 41 Expenditures and revenues 7 43 Expenditures 8 45 Acquisition of financial assets 9 47 Amortizations payment for domestic and foreign loans 10 48 Public revenues 11 50 Wages and compensation of employees 12 56 Purchase of goods and services 13 58 Interest 14 63 Subsidy , grants and social benefits 15 68 Subsidy of commodities in budget draft for FY 2012/2013 16 70 Subsidy of petroleum products for fiscal YEAR 2012/2013 17 72 Purchase of non financial assets ( investments ) 18 80 Investments main components 19 81 Function classification for the state’s , expenditures According to state’s activities 20 83 Expenditures according to functional classification by Budget chapters for FY 2012/2013 21 84 Public revenues 22 85 Development of tax revenues proceeds 23 88 Components of tax revenues 24 90

Tables index

Data table number page

Income tax 25 92 General sales tax 26 95 Taxes and customs duties 27 97 Other taxes revenues 28 100 Other revenues 29 103 Social dimension 30 107 Ratio of social dimension to public expenditures 31 108 Net acquisition of financial assets 32 112 Overall deficit 33 114 Net borrowing and resources of financing 34 116 Development of net public debt 35 119 Development of net domestic and foreign debt 36 121 The public Treasury Budget, the aggregate image of the State’s general budget 37 124 Public treasury budget , general outcomes of the state’s general budget 38 125 Estimates of state’s budget performance for the coming three fiscal Years 2012/2013 - 2014/2015 39 132 The total transfers from the economic authorities to the budget And vice versa in 2012/2013 40 135 The total transfers from the economic authorities to the budget in F/Y 2012/2013 comparing with 2011/2012 budget 41 136 The total transfers from the budget to the economic authorities in F/Y 2012/2013 comparing with 2011/2012 budget 42 137

In the name of Allah the most gracious the most merciful

I only intend reform as much as I am able. And my success is not but through Allah . Upon him I have relied , and to him I return.

Almighty Allah speak the truth

Honorable / president of the people assembly

Ladies and gentlemen member of the esteemed council

It is an honor to submit to your esteemed council the draft of the

State’s General Budget for the fiscal year 2012/2013. Since the State’s

General Budget is being described as the financial program of the

public plan for the upcoming fiscal year, that aims at realizing economic

growth with rates that boost both the production and the Gross Domestic

Production (GDP), raising the per-capita, bolstering the investments,

increasing the job creation opportunities, and consequently mitigating

the unemployment levels, however, it is a financial budget that comes in

the context of the Social and Development Public Plan that seeks the

accomplishment of the State’s Policy within the scope of the required

equilibrium between realizing the social justice and achieving the

economic growth.

Hence, I am honored to address to your respected council the

financial statement on the State’s General Budget for the fiscal year

2012/2013, which is by coincidence synchronizing the first year of the

five years social and development plan 2012/2013 – 2016/2017.

-1-

Initially, and without a doubt, we are witnessing a crossroad phase

in the political transition history that is being experienced by Egypt,

confronting a high critical economic stance. So, all efforts must be

exerted with full capacities to respond positively to the social demands,

meanwhile, achieving the balance between the possible capabilities

against the required demands, the issue that is considered a difficult

equation, also, fighting against poverty, eliminating the unemployment,

but, primarily, we must be guided by the social justice in our efforts.

Hence, we should tie the economic policy with a practical vision

during the formulation of the financial statement that is being expressed

by the State’s General Budget, such vision should be capable of

contributing to the establishment of the pillars of the social justice, along

with drawing the economic policy to realize the necessary economic

growth rates, and the results will be materialized in a shape of real

increase in the per-capita, consequently realizing an appropriate standard

of living for each Egyptian citizen.

The State’s General budget for the coming year 2012/2013 came

after eighteen months pregnant with various challenges that are being

countered by the Egyptian economy due to the circumstances of the

transitional period that we are experiencing now.

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Such period - in particular during the first year that followed the 25

January 2011 revolution - has witnessed a setback in the economic

growth rates, reduction and deterioration of the International Reserves,

more pressures on the budget, widening of the financing gap, these are

being obviously reflected in the consecutive increases in the domestic

interest, in particular with downsizing of the domestic liquidity available

for financing, the issue that led to the narrowing of what is called the

fiscal space available by the financial policy, the space that allows the

interference to meet the urgent circumstances in an exceptional manner,

on the top of that the situation of wait and see of the economic

performance in the medium term, and its ability to be restored and

recovered within a short period of time on the lights of both domestic

and external challenges.

In a synchronization with that, the global economy is confronting

the worst economic crises ever – specially in the European Union

Countries which represent the strategic partner to Egypt – the remedy for

such crises not only require just the injection of sizable resources of

financing, or introducing a package of difficult reform measures, but

also, they need basically reforming the financial and economic

distortions in different regions at the globe, so the international policy

plays an important role in this case, hence finding the profound solutions

will require longer time, so we must be prepared to counter their effects

as required.

-3-

These developments have the influence on assessing the

creditworthiness of the Egyptian economy, where the ratings agencies

has downgraded Egypt creditworthiness several times, along with the

Egyptian investments in the other institutions including the financial and

banking sectors, this is due to the downgrading of the sovereign

assessment, the issue that requires more efforts to be exerted, and

reforms to be introduced for the purpose of restoring the confidence of

the national economy.

Hence, the transitional government has intensified their efforts

during the last six months, primarily to hold back the economic

deterioration, and healing the vulnerability of the budget, meanwhile,

taking into accounts the imperative social demands despite the huge

pressure laid on the budget. Praise be to Allah, And because of the

efforts and the solidarity of all loyal citizens we were able to achieve the

following:

Realizing a growth rate of 5.2% of the GDP during the third

quarter of the fiscal year 2011/2012 after a setback of -4.3%

during the reference period in the fiscal year 2010/2011.

Rationalizing the public spending pursuant to the ordinance

NO,189/2011, reducing the public expenditures for the fiscal year

2011/2012 by an amount of L.E 14.3 billion, relying on those

expenditures that don’t negatively affect the vulnerable groups

any way. Also additional efforts are exerted to magnitude such

rationalization to hit L.E 20 Billion, and perhaps L.E 25 Billion

in case it is applicable.

-4-

Intensifying the due diligence to restore the economic machineries,

along with the gradual enhancement of the security stance, even

if it is emerged to be insufficient but it is a required some time.

So, the growth rate of both tourism and manufacturing sectors

began to be recovered, meanwhile the building and construction

sector began to move appropriately, also the continuity of the

distinct performance of the Suez Canal.

preventing the continuing deterioration of the International

Reserves in foreign currency of Egypt even it is a bit slow.

The adoption of many social programs that are covering the

peasants and resolving their financial problems with (BDAC) the

Bank of Development and Agriculture Credit, providing the

health care for the family supportive women , infants, children

under school age, increasing solidarity pensions, also increasing

the numbers of beneficiaries, providing the financial allocations

needed for school nutrition, completing the implementation of the

program of supporting the lower income people economy

housing, increasing the pensions by 10 % , considering the

minimum level of pensioner, also putting a minimum ceiling for

the determined increase of the social measures.

Removing the Gas subsides provided for the intensive gas

consumption industries, where they are reoriented and poured

into the budget, and reducing the fuels subsidies bill.

Defining a cap for the incomes linked to minimum threshold to

narrow the gaps among the public money earners, and

consequently realizing the social equitability, the matter that still

-5-

under ongoing discussion among your esteemed council for

setting more measures and adjustments.

The response to various class demands, despite the exaggeration of

many of them, the gradual moving toward permanent recruitment

for the temporarily workers, and planning to exclude the

remaining of those specified period contracted groups other than

the first chapter one ( wages and compensations ) or those with

contracts on the special accounts and funds with minimum

wages.

Based on those givens above, the economic and the financial

policy during the new era of Egypt history must rely on rebuilding the

confidence in our national economy, and to handle the problem of the

insufficient domestic liquidity, launching the efforts toward achieving

sustainable and comprehensive growth based on strong institutional

pillars, out reaching the benefits for all Egyptians for what is called the

overwhelming development economically and socially, this is will be

done through a set of main fulcrums that could be summarized in

increasing the operational growth rates, fostering the financial and

economic stability through applying structural measures where their

impacts are characterized by the sustainability, along with supporting the

boundaries of the prudent governance in the public fields and the

domains of the companies, supporting the transparency, controlling,

accountability and social dialogue, approving effective policies and

programs supporting the social safety net , while accomplishing a greater

degree of equitability, establishing the basics for cooperation with the

-6-

outer world based on parity and the proper assessment of the common

interests.

Without a doubt, the Egyptian economic structure has changed

drastically, where the driven forces for the development has

characterized with a greater degree of variance and dynamics, such

driven forces include various productive sectors headed by the

manufacturing, construction and building, tourism, communications,

financial services, beside the traditional sectors which were considered

the driven forces in the past including petroleum, Suez Canal sectors, the

change that handed the economy the ability to standstill for un-

negligible period against the external and internal crises. But restoring

the ability and the viability of those sectors require accelerating the

efforts decisively to enable the economy to counter those challenges

continually.

I would like to reiterate, that the negative economic impacts that are

being witnessed by the country are temporarily and predicted, and they

are linked basically to the degree of the confidence in the Egyptian

economy during this transitional period, at the same time they are not

related to any economic structural or potentials vulnerabilities. The

matter that creates an optimism – meaning a prudential optimism – and

also it calls for accelerating the efforts by the various political parties

and the other community members to be adopted before they turning to

weakness centers affecting the economic skeleton and its productive

structures . so , we need to work hand in hand to enable the Egyptian

economy once again and restoring its rank among the promising markets

-7-

the matter could be realized during a few years to come with the will of

Allah.

In the context of the addressed financial statement on the

2012/2013 budget draft, I have the honor to elaborate on the following

topics.

First: The economic stance and the challenges of the current phase.

Second: The aggregates of the State’s General Budget for the Fiscal

year 2012/2013.

Third : the basis of estimating the uses and sources of the State’s

General Budget for the fiscal year 2012/2013 draft.

Fourth : the social dimension in 2012/2013 budget draft.

Fifth : the fiscal equilibrium basics in 2012/2013 budget draft.

Sixth : the Public Treasury budget draft in the fiscal year 2012/2013.

Seventh : the fiscal policy orientations at the medium term.

Eighth : the relationship with the economic authorities

Minister of Finance Momtaz Elsaied

-8-

Chapter 1

The economic stance &

Challenges of the current phase -----



It is relatively important, as we prepare for presenting the draft of the State’s General Budget for the fiscal year 2012/2013 to address the economic stance globally and domestically, to identify those challenges that we are confronting.

First : the global economic stance

1- The performance of the global economy

The global economy has experienced a tangible set back in the growth rates levels during 2011, achieving a growth rate of 3.9% comparing with 5.3% in 2010, this is due to a retreat in the developed countries economic performance in particular in USA and European Union, in addition, the relative retreat in the economic growth rates of the emerging economies comparing with their high performance accomplished in the past years.

In this context, a world economic outlook report issued by the IMF in April 2012 indicating that the global economy have excepted the continuity of the retreat in the growth rates globally down to 3.5% in 2012, before picking up to 4.1% in 2013, this pickup based on the projection of the increase of the non government international demand,

-9-

and the enhancement of the macroeconomic criteria, along with the adoption of the reform policies and fiscal discipline that are being applied by some of the developed countries recently.

Some of the positive indicators have emerged during the last quarter of 2012 and the first quarter of 2012, that contributed to the enhancement of the global economic performance, but there are still caveats as we will elaborate later. From one aspect, there are enhancement in the industrial indicators at the developed countries, and relatively enhancement at the emerging economies, also the recruitment indicators were improved in the USA with the projection of the mitigation of the unemployment rate from 9% in 2011 down to between 7.8% and 8% at the end of 2012. Also there were a jump in the industrial production in various Asian countries with the expectation of the increase of the Asian economic growth rates specially after the impacts of Thailand flood and the devastating earthquake of Japan.

-10-

Table No. (1)

Development of the World

GDP growth rates

Annual Change 2012 Annual Change 2013 Description 2008 2009 2010 2011 Projected in

Jan. 2012 Projected in

April 2012 Projected in

Jan. 2013 Projected in

April 2013 World Economy 2.8 -0.6 5.3 3.9 3.3 3.5 3.9 4.1 Developed economies 0.0 -3.6 3.2 1.6 1.2 1.4 1.9 2.0 USA -0.3 -3.5 3.0 1.7 1.8 2.1 2.2 2.4 Euro area 0.4 -4.3 1.9 1.4 -0.5 -0.3 0.8 0.9 Japan -1.0 -5.5 4.4 -0.7 1.7 2.0 1.6 1.7 UK -1.1 -4.4 2.1 0.7 0.6 0.8 2.0 2.0 Canada 0.7 -2.8 3.2 2.5 1.7 2.1 2.0 2.2 Emerging & Developing economies

6.0 2.8 7.5 6.2 5.4 5.7 5.9 6.0 Middle & East Europe

3.2 -3.6 4.5 5.3 1.1 1.9 2.4 2.9 Commonwealth Independent Countries

5.4 -6.4 4.8 4.9 3.7 4.2 3.8 4.1 Asian Developing economies

7.8 7.1 9.7 7.8 7.3 7.3 7.8 7.9 China 9.6 9.2 10.4 9.2 8.2 8.2 8.8 8.8 India 6.2 6.6 10.6 7.2 7.0 6.9 7.3 7.3 The Caribbean 4.2 -1.6 6.2 4.5 3.6 3.7 3.9 4.1 Middle East & North Africa

4.7 2.7 4.9 3.5 3.2 4.2 3.6 3.7 Egypt 1/ 7.2 4.7 5.1 1.8 - 2.0 - 3.5 Africa South Desert 5.6 2.8 5.3 5.1 5.5 5.4 5.3 5.3

Source: Report of World Economy Outlook‐International Monetary Fund. April 2012/ According to Egyptian government estimates in view of the negotiations with the International Monetary Fund's mission that visited Egypt in 28th March till 10th April 2012. It is worth mentioning that data regarding Egypt reflect development through fiscal years and not calendar years. It is important to note that unemployment rate in United States in April 2012 decreased to its lowest level since three years hitting a record of 8.1%.

-11-

Despite the well performance evidences referred to, yet, still the recovery indicators of the global economy are fragile, where the global economic environment are surrounded with many risks, on the top of those risks, the failure to address the focal causes creating the global crises till now, which represented in the disequilibrium in major economic regions globally, also the structural problems in the financial sectors and the global markets, and the effects of such causes that extended to many countries particularly the European Union Countries.

These are accompanied by deflators , among which the shift from the financial catalysts of the economic activities to those policies that create the discipline due to the jump of the public debt and the budget deficits to higher levels in most countries- the developed countries in particular- also, the increase in the unemployment rate among the youth, the increase in the inflation rates globally due to the fuel upward prices and the fluctuation of the food prices. Also because of the banks efforts to reduce their nonperforming debt portfolio, and the reluctance of the household sector to borrow, and the real estates losses that still dominant in the American real estate market , these factors in aggregates create challenges that impede the recovery of the global economy, or the sustainability of such recovery on the long run.

-12-

Advanced Economies

Emerging and Developing Economies

Middle East and North Africa

Egypt 1/

0

2

4

6

8

10

12

14

16

18

2008 2009 2010 2011 2012(projected)

2013(projected)

(%)

Development of the inflation rates based on consumer price index(Annual statement for the period 2008‐2013)

Source: IMF outlook report April .1/ According to Egyptian Government Estimates in view of the negotiations with the IMF's mission . It reflects the estimates for FY 2011/2012,2012/2013.

There are austerity measures envisaged to be applied in the Euro

Zone Countries which amount to 1.5% point of the GDP in 2012, those

measures are varied among those countries that suffer sovereign debt

crises, for instance, Greece, Portugal, Spain, Italy, and those countries

that try to avoid the same dilemma. These policies are expected to push

the Euro Zone Countries into a recession during2012(an expected

negative growth of 0.3% of GDP), consequently, maintaining the

unemployment in a high percentage, the level that reach 25% in Spain

for example. Also there are still an increased concerns of a sever

deterioration in the European Economy and banking institutions,

moreover, threatening the Euro Currency in case that, the Greek

-13-

parliamentarian elections held in mid june2012 will lead to the success

of the rejecting political parties to introduce a new package of austerity

measures beginning of the next month, the measures that will lead to the

ouster of Greece from the Euro Zone, hence extending the negative

impacts to the rest of the other countries in southern Europe and

threatening their existence within the Euro Currency Zone.

The Euro Zone’s recession causes negative impact on the economic

performance of the developing countries, those that are economically

tied closely with Europe, and Egypt among which, and the remaining of

the southern Mediterranean countries. Such recession has the effect on

the magnitude of the intra trade, in particular the exports of the southern

Mediterranean countries ,also on the magnitude of the foreign

investment flows and the financial aids, also on the European tourism,

and the expatriates remittances, the issue that lays more pressures on

those economies.

As per the USA, despite of the economic enhancement, that have

been emerged lately through some economic indicators as it was referred

to previously, however, the failure to find a decisive and clear solutions

for the dilemma of the accumulated debts and budget deficits –

particularly during the American Presidential elections year – cast

doubts on the future of the American economy and the growing

potentials by rates exceed 1.9% in 2012, specially, with the weakened

performance of the real estate market there, and the impacts related to

the European crises that undermine the speed recovery of the American

economy.

-14-

As per China, the second largest economy in the world, the Chinese

economic growth rate is projected to decline down to 8.2%, a reduction

of 1% point in 2011 comparing with 10.4% in the previous year. Yet, the

external balance surplus for China was declined to 2.8% of the GDP in

2011 comparing with a surplus of 10.1% of the GDP in 2007, due to the

reduction of the trade balance surplus that accompanied the international

upward prices of the basic commodities, and the high costs of the

domestic productions, and the demand rates regression from the strategic

trading partners of china.

As per the countries of the middle east and north Africa ( MENA ),

the average growth rate retreated to 3.5% in2011, meanwhile it is

expected to heal to 4.2% in 2012, such regression was higher in fuel

importer countries in the region, where the average growth rate in those

countries was 2% approximately in 2011, such average is expected to hit

2.2% in 2012. Also the costs that associated with the political transition

have their impacts on the economies in the region in general, and on the

MENA countries in particular. Since those countries suffer an

insufficiency of their own resources in foreign currency due to the

setback in the flows of both tourism and foreign investments into those

countries, also, because of reasons associated with the negative impacts

of the external factors such as the European economic recession the

strategic trading partner to the MENA countries, and the increase of the

international fuel prices. Also, the democratic transition countries are

confronting major challenges represented in the inability to create job

opportunities sufficient to absorb the new labor forces particularly from

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the youth, and responding to the accumulated public demands, and their

strength to apply a new model of economic growth, where all society

partners can share its benefits.

The working paper of the finance ministers meeting prepared in the

context of Deauville countries partnership in April2012 has projected the

external financing requirements and meeting the budget deficits of the

fuel importer countries by around $93 billion and $ 103 Billion during

2012/2013 respectively.

2- The performance of the basic commodities market

From the other aspect, the prices evolution of the basic

commodities in the international markets, creates additional pressures

on the international inflation rates, along with their sever impacts on

the food security in the food importer developing countries, the

international food prices have fluctuated due to several factors,

among which the increased demand of the developing countries and

the drought waves that hit other food producing countries from one

side, and the increase of the international inventory available in some

commodities which attributed to the over production of some basic

crops, for instance the grain from the other side.

Despite the high level of the international inventory of food during

the last year, however, such level still below the average level of the last

four decades comparing with the consumption rates based on the IMF

-16-

assessment, such prices fluctuation represent extra pressures on the food

importer developing countries budgets.

During the period July-March 2011/2012, the international wheat

stock markets have witnessed a retreat in the average prices of the

American wheat of 8% comparing with the nine months of the previous

year, to reach USA$ 252 / ton. That is attributed to the expansion of the

cultivated lands with wheat to benefit from the jump in prices in

2011/2012, in particular the increase of USA wheat crop the second

biggest wheat resource internationally, that expansion led to projection

of the wheat inventory augmentation internationally in 2011/2012 of

about 2% comparing with last year production. From the other side, the

devaluation of the exchange rate of the basic currencies against the

USA$ have contributed to reducing the international demand on the

wheat purchase contracts globally.

Meanwhile, the prices of the soybeans oil continued to increase

during 2011/2012,where the average price have reached 1170

USA$/Ton during the period July/March 2011/2012, an increase of 8%

comparing with the first nine months of the previous year, such increase

was due to the dry weather that negatively hit the soybeans production

of Latin American Countries the biggest exporter of that crop globally,

the issue that created a huge crop productivity loss of 30% , also, the

international prices jump of the petroleum led to an increase of the

soybean oil prices during the studying period, on the light of relationship

links of the price curves of these tow commodities as a result of utilizing

-17-

the natural oils of the pants in producing bio energy fuel replacing the

traditional energy resources.

The political developments in the Middle East region have also led

to an increase of the petroleum international prices, to levels where it

reached to 120 USA$/Barrel for Brent most of the period July/March

2011/2012, also, the shrinking production and exporting of Libya have

downsized the global supply, an addition, the risks due to the ascending

sanctions on Iran which may negatively affect not only the Iran oil

supply, but also closing Hormoz strait through which 40 % of the

international petroleum trade pass through. The petroleum prices during

2012 are projected to rank between 110 to 113 USA Dollar per Barrel.

0

20

40

60

80

100

120

140

0

50

100

150

200

250

300

350

400

450

500

($/bbl)

($/Ton)

Oil )Brent (

Average of American wheat1/

March

2009March 2010

March

2011March

2012

March

2007March

2007March 2008

March 2009

March 2010

March

2011March 2012

Source : Kansas and Chicago Stock Exchange for commodities trading‐World Bank

. Hard Red Winter & 1/ The average prices for soft Red Winter

2/ Prices for 2012/13 were estimated based on the future contracts in Kansas and Chicago Stock Exchange

March

2008March

2013 2/

Developmets of International prices for oil & wheat(March 2007‐March 2013)

March

2013

-18-

Table No. (2)

Development of World Prices for

Selected major commodities

(USD/ton)

Actual Estimates 3/ Commodities 2009 2010 2011 2012 2013

Food Commodities

Wheat 1/ Growth rate

224.1 223.6 -0.2%

316.3 41.5%

290 -8.3%

270 -6.9%

Maize Growth rate

165.5 185.9 12.3%

291.7 56.9%

260 -10.9%

230 -11.5%

Rice 2/ Growth rate

555.0 488.9 -11.9%

543.0 11.1%

500 -7.9%

490 -2.0%

Soya oil Growth rate

848.7 1004.6 18.4%

1299.3 29.3%

1100 -15.3%

1000 -9.1%

Sugar Growth rate

40.0 469.3 1073.3%

573.2 22.1%

480 -16.3%

450 -6.3%

Cocoa Growth rate

2888.8 3133.0 8.5%

2980.1 -4.9%

2700 -9.4%

2400 -11.1%

Tea Growth rate

2724.0 2884.9 5.9%

2920.5 1.2%

2810 -3.8%

2760 -1.8%

Minerals

Aluminum Growth rate

1664.8 2173.1 30.5%

2401.4 10.5%

2300 -4.2%

2400 4.3%

Copper Growth rate

4711.0 6672.4 41.6%

7181.3 7.6%

8500 18.4%

9000 5.9%

Gold (USD/Oka) Growth rate

890.1 1084.5 21.8%

1275.7 17.6%

1750 37.2%

1600 -8.6%

Other Commodities

Cotton Growth rate

1382.0 2283.4 65.2%

3327.9 45.7%

2300 -30.9%

2280 -0.9%

Rubber Growth rate

1920.7 3653.9 90.2%

4823.2 32.0%

3500 -27.4%

3250 -7.1%

Oil Brent (USD/Barrel) Growth rate

61.9 79.6 28.7%

110.9 39.3%

105.9 -4.5%

103.2 -2.5%

Source: The World Bank estimates, dated on 4th April, 2012. 1. Price Averrage of US. Hard Red Winter Wheat. 2. Thai Rice 5%. 3. 2012, 2013 Forcasts are estimated according to the future agreements in the

Intercontinental Exchange (ICE).

-19-

Second : the domestic economic stance and the phase challenges Despite of the capability of the Egyptian economy to pass through the crises of the basic commodities increased prices internationally in 2007/2008, the crises that followed by the international financial crises that began in the last quarter in 2008, without stumbling technically in a deflation situation even under the current circumstances prevailed, however, the economic growth rates achieved since then – despite of their enhancements in the last two quarters – are still in general below the required levels needed to create sufficient job opportunities to absorb the new job hunters or to generate the required surpluses needed to finance the economic activities generally, the issue that led to widening the financing gap and the need to strongly invite greater foreign investment flows, which, were actually not only stopped, but also they turned to capital outflows that synchronized with the current transitional period.

The data available refer to an achievement of an economic growth rates of 1.8% during 2010/2011 against 5.1% in the last year, due to the aforementioned circumstances, also the annual growth rates in mid 2011/2012 were 0.3% against 5.6% during the reference period the last year, and 5.2% during the third quarter in the current year, those rates are still humble , and represent a true challenge, since the economic driven force sectors like, manufacturing, tourism, construction, building, whole and retail trade sectors were negatively affected by the consecutive circumstances.

Preliminary studies refer to a relative enhancement in the growth rates projections during the current year to range between 2% to 2.25% and they could be ranged between 4% to 5% during 2012/2013 the level that will be gradually raised to around 6% during 2013/2014.

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Achieving those rates require implementing the necessary measures to provide the needed liquidity in the short term to mitigate the financing costs required for the different economic fields. Also, accelerating the completion of the transitional period, along with resuming the efforts to restore the security situation. In addition, applying many of the urgent, imperative, structural procedures to contribute to the return for rebuilding the confidence in the Egyptian economy, and preventing the security stance on the regional level or the economic and financial situation on the international level of getting more worst. Hence those surrounding risks that impede the achievements of those rates are still under a big considerations from different state’s institutions.

The State’s General Budget for the fiscal year 2011/2012 is expected to create a deficit of around L.E 150 Billion during the current year, or about 9.8% of GDP, the same ratio of 2010/2011, such ratio is considered high, the matter that requires a huge magnitude of financing needs which will be accumulated year after another, this is an unsustainable situation with economic and financial negative sequences, the issue that requires due diligence to have these ratios of budget deficit shrank. So, there is a need to introduce a package of structural measures characterized by sustainability, and working on redistributing equitably the economic surpluses, among which rationalizing the energy subsidies, expand the tax base, and clear the cross debt problems among the different state’s sectors and the completion of process of reforming the Public Treasury management along with public finance, and a likes of such corrective measures, which may also could be supported by other exceptional non structural measures, for instance, land sale programs, granting licenses to the investors and others, however, these exceptional measures cannot be viewed as the cornerstone of introducing remedy to the structural disorder existed in the skeleton of both public revenues and expenditures.

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The 2012/2013 State’s General Budget draft targets a deficit of a around L.E 135 Billion ( 7.6% of GDP), the target that will require viewing the introduction of further rationalizing measures and the redeployment of the expenditures toward and in favor of the more vulnerable groups, supplying them with their basic demands of commodities, services, Education, and Health, also working on having the tax base more expand, accomplishing the tax equity in conformity with the general frame of the Social and Economic Program that achieve the corrective targets for the state’s public finance.

On the arena of the Monetary Policy, the Central Bank of Egypt (CBE ) will continue to resume the monetary policies that are contributing to providing the necessary liquidity for the economic activities, meanwhile preventing the accumulation of the inflation rates derived by the demand factors, however, these require to deal with the inflation causes generated on the supply side, that are represented mainly in the need to backup the efficiency of the domestic markets, and the structural bottlenecks of channeling the basic commodities, particularly the food stuff. The Central Bank of Egypt has lately reduced its possession from the banks reserves on two layers to reach 10 % of the domestic deposits denominated in Egyptian Pounds instead of 14 % previously, also the CBE interference in the REPO operations to inject more short term liquidity for market support, however, these measures need to be supported by restoring the ability of the economy to grow and increasing production, generating surpluses demanded to finance different aspects more sustainability without inflationary risks.

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On the external level, the Balance of Payment has recorded a deficit of USA$ 9.8 Billion during 2010/201, despite of yielding a surplus of USA $ 0.6 Billion during the first half of the same first year, also it recorded a deficit of about $ 8 Billion during the period July/December2011/2012, to build up the foreign currency international reserves at the Central Bank of Egypt to USA$ 15.2 Billion at the end of April2012. So, it is a beginning of an enhancement that might be relatively minor in the international reserves after a consecutive serials of downsizing along the previous months, it is worth mentioning that most of such reduction in these reserves during the last 18 months were the consequences of the volatile outflows .

Based on these developments, the targeted budget deficit in 2012/2013 of an amount of L.E 135 Billion means that there is a financing gap of such amount, which must be covered either by borrowing from the national domestic savings that rely mainly on the issuance of the public treasury for T. Bills & T. Bonds or through some of the foreign financing, the matter that is required in case of the insufficiency of the domestic liquidity available in the banking system specially, also we cannot exclude our borrowing needs from the International Monetary Fund ( IMF ) by an amount of USA$ 3.2 Billion, along with some external loans from World Bank, the African Bank for Development either to finance our developmental projects or to provide us with the financing needs in general, assuring that the IMF borrowing is non conditional under any circumstances, but it’s an accreditation for the ability of the Egyptian economy to recover and to move ahead.

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Table No. (3)

Major Indicators of the macroeconomy Performance

Description Actual 2008/2009

Actual 2009/2010

Actual 2010/2011

Projected 2011/2012

Estimates 2012/2013

Real Sector indicators GDP (Billion EGP) 1042 1207 1372 1530 1778 Growth rate to GDP (%) 4.7% 5.1% 1.8% 2.0% 4-4.5% Per Capita GDP (EGP) 13702 15514 17233 18613 21157 Per Capita GDP (USD) 2486 2814 2966 3030 - FDI (USD) 8.1 6.8 2.2 0.3 1.7 Unemployment rate 9.4% 8.9% 11.8% - - Domestic Prices Average of inflation rate (record of consumers prices, republic's urban)

16.2% 11.7% 11.0% 9.1 12.5%

Average of interest rate on domestic debt (%) 6.6% 8.6% 10.7% 10.5% 12.3% Average of interest rate on T-Bills (91 days) (%) 11.3% 9.9% 10.2% 12.9% 14.3% Public Finance Indicators (% to GDP) Overall deficit for state's general budget 6.9% 8.1% 9.8% 9.8% 7.6% Primary Deficit for general budget 1/ 1.8% 2.1% 3.6% 2.9% 0.08% Total financing needs (Million EGP) 355 453 549 653 812 Net financing needs (Million EGP) 90 125 167 219 228 Total debt of general budget's entities 81.0% 79.3% 82.3% 83.4% 80.3%

Domestic 67.1% 67.0% 70.5% 72.6% 70.7% Foreign 13.8% 12.4% 11.8% 10.8% 9.6% Foreign Sector Indicators Current balance (Million USD) -4424 -4318 -2769 -8000 -6800 Current balance (% to GDP) -2.3% -2.0% -1.2% -3.2% -2.7% Overall balance (Million USD) -3378 3356 -9754 -14400 -6200 International reserve (Million USD) 31310 35221 26569 16000 18200 No. of months of imports coverage (Month) 7.5 8.6 4.0 4.0 4.3 International Economic Indicators GDP rate 2 -0.3 0.9 4.6 3.7 3.8 Rate of international trade growth (imports) 2/ 2.9 12.9 9.4 4.9 4.8

Petroleum prices (Brent-USD/Barrel) 3/ 68.9 74.7 96.3 112.5 105.0 Average of global wheat price (USD/ton) 4/ 229 191 294 253 265 Stock Index or EGX-30 in 30 June 5703 6033 5373 - -

Capital Market (% to GDP) 44.5% 34.0% 29.1% - - Source: MOF. CBE, MOPIC, IMF

1. Primary deficit equal overall deficit after excluding interest payments. 2. IMF data by using average of two calendar years. 3. Future prices for Oil from New York Stock (Nymex). 4. Average of wheat prices based on winter solid red wheat prices, winter soft red wheat

(Nymex)

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Chapter 2 The aggregates

Of the State’s General Budget

For the Fiscal year 2012/2013 -----



Please permit me to address to your esteemed council some of the important aspects of the State’s General Budget for the fiscal year 2012/2013 . L.E projection Billion -------- -------------- 533.7 total expenditures 393.4 total revenues -------- 140.3 cash Balance -5.3 net accusations Of financial assets -------- 135.0 overall balance -------- The overall balance represents a percentage of 7.6% of the projected GDP in the upcoming fiscal year along with a targeted real growth rate ranged between 4% and 5%.

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Analyzing the most significant components of both expenditures and revenues of the State’s General Budget identify the following:

First : analyzing expenditures

The expenditures comprised in the State’s General Budget for the fiscal year 2012/2013 are projected with L.E 533.7 Billion comparing with L.E 490.6 Billion in the F/Y 2011/2012, yielding an increase of L.E 43.1 Billion, with a growth rate of 8.8 % , where ,these expenditures represent 0.30% of GDP. The following ingredients represent the aforementioned expenditures 1- Wages The estimated wages included in the budget draft amount to L.E 136.6 Billion, comparing with L.E 117.5 Billion in 2011/2012 budget, with an increase of L.E 19.1 Billion and growth rate of 16.3%, these wages represent a percentage of 25.6% of the total expenditures included in the budget draft that amount to L.E 533.7 Billion. Considering the following: All inevitable amendments pursuant to the regulated laws and decrees

concerning the periodical, encouraging, promotions bonuses, and insurance benefits and others.

The inclusion of the special increment determined by the law77/2007 of 15% , also adding the special bonus determined by the law 114/2008 of 30 % as of May first 2013.

The improvements introduced to the incomes of the officials working either in the education, or health, sectors or improving the incomes of the Imams of the Mosques, preachers, also improving the cadre of the police body.

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2- Purchase of Goods and Services

The estimated appropriations of the purchase of Goods and Services

included in the second Chapter of the budget draft of 2012/2013 amount

to L.E 28.8 Billion, comparing with L.E 30.2 Billion in 2011/2012

budget, with a reduction of L.E 1.4 Billion and reduction rate of 4.6%,

these supplies represent a percentage of 5.4% of the total expenditures

included in the budget draft that amount to L.E 533.7 Billion. 3- Interest

The estimated appropriations of the domestic and external loans

interest included in the budget draft of 2012/2013 amount to L.E 133.6

Billion, comparing with L.E 106.3 Billion in 2011/2012 budget with an

increase of L.E 27.3 Billion and a growth rate of 25.7 %

These interest absorb around 25 % of the total expenditures included

in the budget draft that amount to L.E 533.7 Billion. These interest are

calculated based on the total issuances of T. Bills , T. Bonds and loans

due domestically or externally during the F/Y 2012/2013.

4- Subsidies, Grants and Social Benefits

The total appropriations determined for that purpose amount to

L.E 145.8 Billion, representing a percentage of 27.3 % of the total

expenditures that amount to L.E 533.7 Billion, these allocations are

basically directed to the following purposes comparing with the

previous year allocations.

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( L.E Billion)

Description 2012/2013 2011/2012 the change

GASC 26.6 18.9 7.7

Petroleum 70.0 95.5 ( 25.5)

Miscellaneous 16.4 18.5 (2.1)

Total subsidies 113.0 132.9 ( 19.9 )

Grants and Social benefits 32.8 54.9 7.9

Gross 145.8 157.8 (12.0)

The subsides of the General Authority of Supplies and

Commodities (GASC) amount to L.E 16.2 Billion for subsidizing the

regular bread either baked from the imported wheat or domestic one or

maize. Also, these appropriations comprise an amount of L.E 10.4

Billion for subsidizing the GASC basic commodities sold within the

ration cards for instance sugar, audible oil and rice.

As per the subsidizing the fuel oil, there is an allocation of just L.E

70.0 Billion, determined to implement a plan to be executed by the

Ministry of Petroleum to rationalize the consumption of these products,

and to insure the delivery of that subsidy to the eligible groups, this plan

include these decrees previously issued concerning the price adjustment

for the Gas consumed in these industries with highly usage of gas or

rationalizing the consumption of the butane gas and changing its

distribution patterns, and utilizing the smart cards in providing the main

sectors and consumers with their determined allocations from diesel and

fuel .

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As per the remaining components of the subsidies, the budget draft

guaranteed the thrift of the subsidies necessary for the peasants, public

transportations, medication, health insurance for the students and the

family supportive women, infants, as well as subsidizing water supply

companies, the economy housing for the lower income earners, in

addition, there is a sum of L.E 3.1 Billion was earmarked for subsidizing

the production for exporting purposes, the latest one was earmarked for

subsidizing the production not the exporters.

Concerning the Grants and Social benefits, the budget draft includes

a sum of L.E 32.8 Billion, of which an amount of L.E 20.7 Billion as

contributions to the pension funds, L.E 2.5 Billion for the solidarity

pension, as well as the other remaining social benefits.

5- Other expenditures

The appropriations earmarked for the other expenditures amount

to L.E 33.3 Billion comparing with L.E 31.6 Billion in 2011/2012

budget, with an increase of L.E 1.7 Billion, and a growth rate of

5.4%, these expenditures represents a percentage of 6.3% of the total

budget expenditures, most of the other expenditures are linked to the

imperative requirements.

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6- The investments

The investments appropriations in 2012/2013 budget draft captured

an amount of L.E 55.6 Billion comparing with L.E 47.2 Billion in

2011/2012 budget with an increase of L.E 8.4 Billion, and growth rate of

17.8%, these investments represent a percentage of 10.4% of the total

budget expenditures of L.E 533.7 Billion, and a percentage of 3.1% of

the GDP comparing with 3% the in the previous year.

The aforementioned investments are earmarked for the governmental

bodies covered under the State’s General Budget as being agreed upon

with the Ministry of Planning and the International Cooperation. A great

portion of financing those investments provided by the Public Treasury,

which allocates an amount of L.E 43.0 Billion approximately, and the

remaining financing rely on miscellaneous capital resources and some

grants and loans.

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second : analyzing revenues

The revenues comprised in the General State’s Budge for the

F/Y2012/2013 estimated by an amount of L.E 393.4 Billion comparing

with L.E 349.6 Billion in 2011/2012 budget, with an increase of L.E

43.8 Billion, and growth rate of 12.5% , these revenues represent a

percentage of 22.1% of GDP, also, they are covering around 73.7% of

the total estimated budget expenditures of L.E 533.7 Billion.

The following ingredients represent the aforementioned revenues 1- Tax revenues

The tax revenues comprise

the income tax, general sales tax, international trade, surcharge fees,

and others with an aggregate of L.E266.9 Billion representing a

percentage of 67.8% of the total revenues that amount to L.E 393.4

Billion.

A . The income tax

The income tax estimated in the budget draft amounts to L.E 150 Billion

approximately, comparing with L.E 130.7 Billion in 2011/2012 budget,

with an increase of L.E 19.3 Billion, and growth rate of 14.8%.The

income tax represents a percentage of 38.1 % of total revenues in the

budget draft that amounts to L.E 393.4 Billion, the income tax includes

among which corporate profits of the petroleum, foreign partner, Suez

Canal, Central Bank of Egypt ( CBE ), investment companies, public

enterprises, taxes on salaries, commercial and industrial activities, non

commercial professions, and stamp tax.

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B . General Sales Tax

The general sales tax estimated in the budget draft amounts to L.E 83.4

Billion approximately, comparing with L.E 72.1 Billion in 2011/2012

budget, with an increase of L.E 11.3 Billion, and growth rate of

15.7%.The income tax represents a percentage of 21.2 % of the total

revenues comprised in the budget draft that amounts to L.E 393.4

Billion.

C . International Trade

The international trade estimated in 2012/2013 budget draft

amounts to L.E 20.8 Billion approximately, comparing with L.E 18.0

Billion in 2011/2012 budget, with an increase of L.E 2.8 Billion, and

growth rate of around 15.6%.The international trade represents a

percentage of 5.3% of the total revenues comprised in the budget draft .

D . The remaining elements of the tax revenues

The remaining items of the tax revenues include surcharge fees and

other elements of tax and fees, the budget draft comprises an amount of

L.E 12.7 Billion comparing with L.E 11.4 Billion in 2011/2012 budget,

with an increase of L.E 1.3 Billion, and a growth rate of 11.4 %.

2- Grants

Grants estimated in the budget draft amounts to L.E 9.0 Billion

approximately, comparing with L.E 10.0 Billion in 2011/2012 budget,

representing a percentage of 2.3 % of the total budget revenues

approximately.

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3- Nontax revenues

Nontax revenues include surpluses generated from petroleum, Suez

Canal, CBE, economic authorities, public companies, and public

enterprises and others of the current revenues, the nontax revenues in

aggregate amount to L.E 117.5 Billion, comparing with L.E 107.4

Billion in 2011/2012 budget with an increase of L.E 10.1 Billion, and

growth rate of 9.4 % , such revenues represent about 29.9 % of the total

draft budget revenues that amount to L.E 393.4 Billion.

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Table No. (4)

Draft Budget for Fiscal year 2012/2013

(Billion EGP)

2010/2011 2011/2012 2012/2013 Description

Actual Budget Revised Projected Draft Growth rate Growth rate

(1) (2) (3) (4) (5) (5/2)% (5/3)% # Expenditures: - Wages & compensation of employees 96.3 117.5 110.5 110.5 136.6 16.3 23.6 - Purchase of goods & services 26.1 30.2 29.2 29.2 28.8 -4.6 -1.4 - Interests 85.1 106.3 105.3 105.3 133.6 25.7 26.9 - Subsidy to: grants and social benefits 123.1 157.8 154.5 154.5 145.8 -7.6 -5.6 * GASC 32.7 18.9 18.9 25.2 26.6 40.7 40.7 * Petroleum 67.7 95.5 95.5 93.4 70.0 -26.7 -26.7 * Other 10.8 18.5 17.8 14.5 16.4 -11.4 -7.9 Total 111.2 132.9 132.2 133.1 113.0 -15.0 -14.5 * Grants & social benefits 11.9 24.9 22.3 21.4 32.8 31.7 47.1 - Other Expenditures 31.4 31.6 31.1 31.1 33.3 5.4 7.1 - Purchase of non-financial assets (Investments) 39.9 47.2 45.7 43.9 55.6 17.8 21.7 Total Expenditures 401.9 490.6 476.3 474.5 533.7 8.8 12.1 # Revenues : Tax revenues 192.1 232.2 232.2 210.5 266.9 14.9 14.9 * General tax 105.0 130.7 130.7 114.5 150.0 14.8 14.8 * Sales tax 64.4 72.1 72.1 72.8 83.4 15.7 15.7 * Customs 14.0 18.0 18.0 14.7 20.8 15.6 15.6 * Other tax revenues 8.7 11.4 11.4 8.5 12.7 11.4 11.4 - Grants 2.3 10.0 10.0 10.0 9.0 -10.0 -10.0 - Non tax revenues 70.9 107.4 107.4 102.1 117.5 9.4 9.4 * Oil surplus 21.0 37.8 37.8 25.7 26.0 -31.2 -31.2 * Suez Canal surplus 15.3 17.0 17.0 17.2 18.6 9.4 9.4 * CBE surplus 0.5 2.6 2.6 12.5 10.8 315.4 315.4 * Other 34.1 50.0 50.0 46.7 62.1 24.2 24.2

Total Revenues 265.3 349.6 349.6 322.6 393.4 12.5 12.5

Cash Deficit 136.6 141.0 126.7 151.9 140.3 -0.5 10.7 Net acquisition of financial assets -2.1 -6.6 -6.6 -2.1 -5.3 -19.7 -19.7 Overall deficit 134.5 134.4 120.1 149.8 135.0 0.4 12.4

GDP 1371.8 1570.0 1529.9 1529.9 1778.0 13.2 16.2 % of expenditures to GDP 29.3% 31.2% 31.1% 31.0% 30.0% % of revenues to GDP 19.3% 22.3% 22.9% 21.1% 22.1% % of Cash deficit to GDP 10.0% 8.9% 8.2% 9.9% 7.9% % of Overall deficit to GDP 9.8% 8.6% 7.9% 9.8% 7.6%

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Table No. (5)

Aggregates of the State's General Budget

(Billion EGP)

2010/2011 2010/2011 2011/2012 2011/2012 2012/2013

Description Actual July/April July/April Budget Revised Projected Draft

The relative

importance

of the budget

draft

(1) (2) (3) (4) (5) (6) (7) (8) # Expenditures: - Wages & compensation of employees 96.3 72.4 91.5 117.5 110.5 110.5 136.6 25.6 - Purchase of goods & services 26.1 15.4 16.0 30.2 29.2 29.2 28.8 5.4 - Interests 85.1 66.9 88.9 106.3 105.3 105.3 133.6 25.0 - Subsidy to: grants and social benefits 123.1 78.1 101.4 157.8 154.5 154.5 145.8 27.3 * GASC 32.7 22.0 18.4 18.9 18.9 25.2 26.6 5.0 * Petroleum 67.7 38.3 65.5 95.5 95.5 93.4 70.0 13.1 * Other 10.8 8.2 7.2 18.5 17.8 14.5 16.4 3.1 Total 111.2 68.5 91.1 132.9 132.2 133.1 113.0 21.2 * Grants & social benefits 11.9 9.6 10.3 24.9 22.3 21.4 32.8 6.1 - Other Expenditures 31.4 24.2 24.1 31.6 31.1 31.1 33.3 6.2 - Purchase of non-financial assets (Investments) 39.9 26.1 20.4 47.2 45.7 43.9 55.6 10.4 Total Expenditures 401.9 283.1 342.3 490.6 476.3 474.5 533.7 100.0 # Revenues : Tax revenues 192.1 138.8 152.7 232.2 232.2 210.5 266.9 67.8 * General tax 105.0 72.0 81.5 130.7 130.7 114.5 150.0 38.1 * Sales tax 64.4 49.2 52.4 72.1 72.1 72.8 83.4 21.2 * Customs 14.0 11.4 11.8 18.0 18.0 14.7 20.8 5.3 * Other tax revenues 8.7 6.2 7.0 11.4 11.4 8.5 12.7 3.2 - Grants 2.3 1.0 8.9 10.0 10.0 10.0 9.0 2.3 - Non tax revenues 70.9 42.9 62.9 107.4 107.4 102.1 117.5 29.9 * Oil surplus 21.0 11.2 14.0 37.8 37.8 25.7 26.0 6.6 * Suez Canal surplus 15.3 12.2 13.0 17.0 17.0 17.2 18.6 4.7 * CBE surplus 0.5 0.5 12.0 2.6 2.6 12.5 10.8 2.7 * Other 34.1 19.0 23.9 50.0 50.0 46.7 62.1 15.9

Total Revenues 265.3 182.7 224.5 349.6 349.6 322.6 393.4 100.0

Cash Deficit 136.6 100.4 117.8 141.0 126.7 151.9 140.3 0.0 Net acquisition of financial assets -2.1 -1.2 -0.1 -6.6 -6.6 -2.1 -5.3 Overall deficit 134.5 99.2 117.7 134.4 120.1 149.8 135.0 0.0 GDP 1371.8 1371.8 1529.9 1570.0 1529.9 1529.9 1778.0 % of Expenditures to GDP 29.3% 20.6% 22.4% 31.2% 31.1% 31.0% 30.0% % of Revenues to GDP 19.3% 13.3% 14.7% 22.3% 22.9% 21.1% 22.1% % of Cash deficit to GDP 10.0% 7.3% 7.7% 8.9% 8.2% 9.9% 7.9% % of Overall deficit to GDP 9.8% 7.2% 7.7% 8.6% 7.9% 9.8% 7.6%

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Chapter 3 The basis of estimating

the uses and sources of the State’s General Budget

For the Fiscal year 2012/2013 -----



I have addressed to your esteemed council the fiscal aggregates of the State’s General Budget draft for the fiscal year 2012/2013, with a juncture to both the social and financial dimensions, as well as the elaboration of the targeted indicators during this year.

Based on the previous givens, and having in mind the intensive political events and their negative impacts that jeopardized the economic activity last year, hence, while discussing and preparing the State’s General Budget for the fiscal year 2012/2013, we have considered that Egypt has entered into the arena of the economy that rely on the free market mechanisms through many adjustments and criteria of which:

1- Alleviating the drastic level of poverty, and enhancing the standards of living, where, the citizens possess the focal interests in the government working agenda, this is done through establishing the citizen rights to obtain a job, proper income, the continuous improvement of the living standards, insuring a daily income for the individual as being the driven force of the Egyptian economic growth, also guaranteeing the citizen tomorrow’s pension, achieving

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the necessary insurance for him , as well as an express for the social gratitude.

2- Introducing an integrated economic, social and economic frame work addressing a clear roadmap for the public finance, monetary , trading polices, in manner insuring a harmonized and supportive public environment.

3- Achieving an economic growth featured with sustainability and equitability, on condition that, the Egyptian economy must achieve a growth rates ranged between 4% to 4.5 % in 2012/2013, based on the jump of the domestic demand, and restoring the investments upward levels gradually. The Egyptian economic stability is being supported by the diversification of the development resources represented in the manufacturing, trade, construction and building, communications, and Gas sectors, and others economic sectors.

4- Measure to handle the high rates of unemployment, the level of poverty, the quality of the services rendered in the education, health, as well as the distribution of the public wealth and gains more equitably, to confront the social concerns.

5- Resuming the efforts to improve the public sector performance, specially the state’s owned projects, and moving forward to further effectiveness in the public – private partnership to mitigate the pressures burdened the budget and having the private sector in participation in the infrastructures and capacity buildings.

6- Creating additional job opportunities to support the productive activity for the purpose of helping the lower income earners to avoid the continuous reliance on the subsidy, also increasing the incentives for encouraging the creation of job opportunities, along with the direction toward providing more credits to the small and medium projects, treating the bottlenecks for the purpose of filling the gap

-37-

between the demand and supply and increasing the investments in the education and training, in addition exerting the efforts to compromise between the inputs and the jobs available.

Based on the previous elaboration, the overall budget deficit of the

budget draft for the fiscal year 2012/2013 is targeted not to exceed a

percentage of 7.6 % of GDP comparing with 8.6% in 2011/2012 budget,

also, in the context of the current fiscal aggregates, it is projected to

achieve a primary deficit of 0.1% of the GDP comparing with 1.8% in

2011/2012 budget.

The projections of the Uses and sources comprised in the State’s General

Budget for the fiscal year 2012/2013.

Based on the economic indicators aforementioned, and considering

the variables in the energy’s global prices and the nutrition stuff prices

and others - from one side - and the impacts on the movements of the

international trade - from the other side – so, the 2012/2013 budget draft

has been addressed as a reflection of these variables totally.

Hence, I’m honored to address to your esteemed council the main

aspects of the State’s General Budget hereunder:

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First: the basic estimates of the fiscal aggregates of the State’s General

Budget include:

(A) The uses ( the public disbursements )

(B) Public resources.

second: the detailed estimates of the public expenditures of the State’s

General Budget include:

(A) Components of the public expenditures based on the

economic classification.

(B) Components of the public expenditures based on the

functional classification.

third: the detailed estimates of the public revenues .

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First: the basic estimates of the fiscal aggregates of the State’s General

Budget:

The aggregates of the 2012/2013 State’s General Budget amount to

L.E 635.4 Billion comparing with L.E 594.0 Billion in 2011/2012

budget, with an increase of L.E 41.4 Billion, and growth rate of 7.0%.

That, and taking into account the contents of the ordinance No,

189/2011, stipulating the retrenchment of the 2011/2012 State’s General

Budget appropriations, with an amount of L.E 14.3 Billion, hence, the

revised budget have been cutoff down to L.E 579.7 Billion, so, the

increase stipulated in the budget draft comparing with the revised budget

for the fiscal year 2011/2012 would be around L.E 55.7 Billion with a

percentage increase of 9.6%.

The next table shows the uses and the sources of the budget draft

including the different of sources of financing.

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Table No. (6)

Uses and sources of the State's general budget

(Million EGP)

2012/2013 2011/2012 Change Description Draft

(1) Budget

(2) Revised

(3) (1-2) (1-3)

Uses: * General expenditures include wages, purchase of goods and services, interests, subsidy, grants, and social benefits, other expenses and investments

533784.8 490589.7 476289.7 43195.1 57495.1

* Acquisition of financial assets includes contributions and lending the economic authorities & corporations, and support the restructure fund

8074.1 4305.8 4305.8 3768.3 3768.3

* Domestic and foreign loans repayment

93517.4 99143.6 99143.6 -5626.2 -5626.2

Total uses 635376.3 594039.1 579739.1 41337.2 55637.2 Resources: * General revenues includes tax revenues, grants, non-tax revenues

393475.8 349646.7 349646.7 43829.2 43829.2

* Receipts from acquisition of financial assets includes receipts from direct loans installments relent and privatization proceeds

13637.9 11218.8 11218.8 2419.0 2419.0

* Borrowing and issuance of securities includes domestic borrowing by bonds, bills and foreign borrowing

228262.6 233173.6 218873.6 -4911.0 9389.0

Total resources 635376.3 594039.1 579739.1 41337.2 55637.2

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It is worth mentioning that, the operating expenditures – from one

side – and the revenues – from the other side indicate the requirements

of running the governmental operations against the available generated

revenues, so, the gap between both of them indicates the cash deficit of

the budget.

And with addition of the requirements of the acquisition of

financial assets of lending and contributions (excluding the contribution

of the restructuring fund) to the these expenditures, as well as the

addition of the repayments of loans and sales of financial assets

(excluding the privatization proceeds ) to the revenues, so, the result

would be the net acquisition of financial assets, in case of adding such

gap to the cash deficit, then the overall deficit of the budget could be

identified, the sum that reflects the new net borrowing or the net increase

of the public debt excluding the privatization proceeds in case they are

existed.

The next table shows the expenditures, the revenues and the deficit

of the 2012/2013 budget draft comparing with 2011/2012 budget, as

well as the revised budget, and the projections, in addition to the actual

of 2010/2011 budget.

-42-

Table No. (7)

Expenditures and Revenues

(Million EGP)

2012/2013 2011/2012 Description

Draft Budget Revised

2010/2011Actual

General Expenditures: 533.785 490.590 476.290 401.866

1- Wages & compensation of employees 136.627 117.497 110.497 96.271

2- Purchase of goods & services 28.765 30.255 29.255 26.148

3- Interests 133.612 106.300 105.300 85.077

4- Subsidy to: grants and social benefits 145.838 157.754 154.454 123.125

5- Other expenditures 33.325 31.622 31.122 31.364

6- Purchase of non financial assets (investments) 55.618 47.161 45.661 39.881

General Revenues : 393.476 349.647 349.647 265.286

1- Tax revenues 266.905 232.232 232.232 192.072

2- Grants 9.021 9.974 9.974 2.287

3- Other revenues 117.549 107.441 107.441 70.928

Cash Deficit (Expenditures – Revenues) 140.309 140.943 126.643 136.580

Net acquisition of financial assets -5.314 -6.663 -6.663 -2.120

Overall deficit 134.995 134.280 119.980 134.460

Primary deficit 1.383 27.980 14.680 49.383

GDP 1778.000 1570.000 1529.900 1371.800

% of Expenditures to GDP 22.1% 22.3% 22.9% 19.3%

% of Revenues to GDP 30.0% 31.2% 31.1% 29.3%

% of Cash deficit to GDP 7.9% 8.9% 8.2% 10.0%

% of Overall deficit to GDP 7.6% 8.6% 7.8% 9.8%

% of Primary deficit to GDP 0.1% 1.8% 1.0% 3.6%

-43-

( A ) the uses ( the public disbursement )

The aggregates shows that the2012/2013 budget draft uses or what

is expressed by the public disbursement amount to L.E 635.4 Billion

categorized to main three layers as following :

Expenditures

Acquisition of financial assets.

Amortizations payments.

1- The expenditures

The expenditures comprised in the State’s General Budget for the

fiscal year 2012/2013 are projected with L.E 533.785 Million comparing

with L.E 490,590 Million in the F/Y 2011/2012, yielding an increase of

L.E 43.195 Million, with a growth rate of 8.8 %, also such increase

amounts to L.E 57.495 Million comparing with the revised budget of

L.E 476.290 Million with an increase of 12.1 %.

It is of importance to identify that the mentioned increase in the

expenditures mainly due to those factors related to the jump in the

international prices of the imported food stuff connected to the

commodity supplies. In addition, the imperative increases in the wage

bill, the costs of applying the minimum limit of wage, the payment of

the debt interest in conformity with the maturity schedules, and the

increased burdens laid on the public treasury to contribute to the pension

funds.

The following table indicates the expenditures of the 2012/2013

State’s General Budget draft, comparing with the 2011/2012 revised

budget.

-44-

Table No. (8)

Expenditures

2012/2013 2011/2012 Change Description

Draft Relative weight Revised Relative

weight Value Growth rate

Million EGP % Million EGP % Million EGP %

* Wages and compensation of employees

136.627 25.6 110.497 23.2 26.130 23.6

* Purchase of goods and services

28.765 5.4 29.255 6.1 -490 -1.7

* Interest 133.612 25.0 105.300 22.1 28.312 26.9

* Subsidy, grants and social benefits

145.838 27.3 154.454 32.4 -8.617 -5.6

* Other expenditures 33.325 6.2 31.122 6.5 2.203 7.1

* Purchase of non - financial assets (Investments)

55.618 10.4 45.661 9.6 9.957 21.8

Total 533.785 100.0 476.290 100.0 57.495 12.1

-45-

2- The acquisition of financial assets

The acquisition of the financial assets; represent the public treasury

contributions to some of the economic authorities that suffer structural

financial deficiencies, also the public treasury contributions to reform

the financial positions of some companies, as well as the loans available

to some bodies which consider an obligation on the public treasury.

The appropriations earmarked to the acquisition of the financial assets

in 2012/2013budget draft amount to L.E 8.740 Million comparing with

L.E 4.306 Million in 2011/2012 budget as shown in the following table:

-46-

Table No. (9)

Acquisition of Financial Assets





* Contributions to economic authorities

1.988 24.6 1.440 33.4 548 38.1

* Contributions to companies 1.334 16.5 980 22.8 354 36.1

* Miscellaneous loans 135 1.7 117 2.7 18 15.0

* Contributions to international institutions

3.006 37.2 97 2.3 2.909 2.993.0

* Contributions to restructure fund

250 3.1 250 5.8 0.0 0.0

* Other 1.362 16.9 1.422 33.0 -60 -4.2

Total 8.074 100.0 4.306 100.0 3.768 87.5

-47-

3- payment of the amortizations

The estimated appropriations earmarked for the payment of the

amortizations of both domestic and foreign matured loans comprised in

the 2012/2013 budget draft, amount to L.E 93.517 Million comparing

with L.E 99.144 Million in 2011/2012 budget.

Hereunder the loans amortizations determined in the budget draft

Table 10 – the amortizations payment for domestic and foreign loans

L.E Million

Description 2012/2013 2011/2012 Budget draft revised budget Domestic loans 81.860 82.357 Foreign loans 11.490 16.625 Other 167 162 Total 93.517 99.144

Be aware that, the aforementioned amortizations are comprising the

redemption of the matured T. Bonds on the public treasury, in general, it

should be noted that the payment of the loans and the T. Bonds is not

counted among the ingredients of the State’s General Budget deficit, but

such obligations paid are excluded from the sources of financing, or the

new borrowing, to identify the real net increase in the public debt.

The payment of the loans and the T. Bonds is representing an

element of strength of the budget credibility, since such payment

represent a true reduction of the domestic and foreign debt.

-48-

( B ) Public sources

The fiscal aggregates of uses and the sources of the State’s

General Budget for F/Y 2012/2013 included in table 6 shows that

the total budget sources amount to L.E 635.4 Billion categorized

into three layers:

Public revenues.

The acquisitions of financial assets.

The borrowing and issuing securities.

1- Public revenues

Public revenues are representing those proceeds collected from the

operating processes and performing both direct and indirect activities

for those units and agencies included in the State’s General Budget,

and basically, they comprise the tax revenues of their various types, for

instance, income tax, general sales tax, international trade.

Also, such revenues include the domestic and foreign grants, as well

as the other revenues that are mainly represented in the surpluses and

the profits attained from the economic authorities and the public

enterprises, in addition to those revenues yielded from the governmental

services rendered in general.

As it has been previously shown in table 6, the public revenues are

estimated with L.E 393.4 Billion in 2012/2013 budget draft, comparing

with L.E 349.6 Billion.

The following table identifies the referred public revenues

-49-

Table No. (11)

Public Revenues





Tax Revenues:

- Income Tax 150039 38.1 130726 37.4 19314 14.8

- Sales tax 83485 21.2 72118 20.6 11367 15.8

- Customs duties 20759 5.3 18002 5.1 2757 15.3

- Other tax revenues 12622 3.2 11387 3.3 1235 10.8

Total 266905 67.8 232233 66.4 34673 15.0

Grants 9021 2.3 9974 2.9 -952 -9.5

* Non – Tax revenues from surplus, profits, services revenues and others

117549 29.9 107441 30.7 10109 9.4

Total 393476 100.0 349647 100.0 43829 12.5

-50-

2- The acquisition of the financial assets

These proceeds are estimated with L.E13.6 Billion in 2012/2013

budget draft, comparing with L.E 11.2 Billion in 2011/2012 budget, with

an increase of L.E 2.4 Billion, also the budget draft addressed comprises

an amount of L.E 7.2 Billion as a repayment of amortizations collected

from the electricity companies (on the counter part on the expenditures

side there are an inclusion of L.E1.5 Billion included in the second

chapter “ purchase of goods and services “ accommodated in the items

of electricity, water, illumination, phones, also, an amount of L.E 5.0

Billion for subsidizing the electricity included within the fourth chapter

“ subsidies, grants, and social benefits” for the purpose of paying part of

the indebtedness of the electricity sector in favor of the petroleum

sector). .

3-The borrowing and the issuance of securities

The borrowing and the issuance of securities are estimated with L.E

228.3 Billion in 2012/2013 budget draft comparing with L.E 218.9

Billion in 2011/2012 budget, with an increase of L.E 9.4 Billion, and

growth rate of 4.3%.

Such borrowing represents the backbone resource of financing the

budget deficit, as well as covering the gap between the revenues and the

expenditures. In addition, filling the gap between the receipts of

acquisition of the financial assets and the possession of the financial

assets, on the top of that, covering the payment of the domestic and

foreign loans previously referred to, which amounted to L.E 93.5

Billion.

-51-

It is of importance to mentioned that, the payment of such loans

represents in real term a reduction of the public debt , hence, the true

measurement of the debt increase is what is expressed by the overall

budget deficit, or the equivalent to the net borrowing, meaning that, the

new borrowing excluding the payment of the domestic and foreign

loans.

Second: the detailed estimations of the public expenditures of the

2012/2013 State’s General Budget draft.

I have addressed to your esteemed council the basic estimations of

the 2012/2013 State’s General Budget draft, where the aggregates of

this budget amount to L.E 635.4 Billion, also, I have identified their

main purposes either on the uses side or the sources side.

Also, the State’s General Budget must present the expenditures in

conformity with both the economic and functional classification, also,

these classifications should be distributed to the various disbursement

chapters of the budget in transparent and clarified manner.

Whereas, the budget expenditures represent the major portion of

the uses size of the general budget, as the expenditures amounts to L.E

533.7 Billion of the total uses that amount to L.E 635.4 Billion.

-52-

So, it is of significance to addressed to your esteemed council the

classification of these expenditures in conformity with the following:

The economic classification.

The functional classification.

(A) The main expenditures components based on the economic

classification

The major components of the expenditures in conformity with the

economic classification for the State’s General Budget represented in

the following:

Wages and compensations of the employees.

Purchase of goods and services.

Interest payment.

Subsides, grants, and social benefits.

Other expenditures.

Purchase of nonfinancial assets.

-53-

Wages and compensations of the employees

The first chapter of 2012/2013 State’s General Budget draft “ wages

and compensation of the employees “ estimated with L.E 136.627

Million, comparing with L.E 110.497 Million, in 2011/2012 revised

budget, with an increase of L.E 26.130 Million, and growth rate of

23.6%.

It is observed that, the appropriations earmarked for the wages and

the compensations of the employees represent a percentage of 25.6% of

the total expenditures in budget draft that amounted to L.E 533.785

Million, also they are representing 21.5% of the budget uses that amount

to 635.376 Million.

It is of prominence to affirm that, the state’s commitment to thrift

the wages, remunerations, and incentives of the employees, shed the

light on the solicitude of the state’s and it’s role to fulfill the following

social and the economic aspects:

Absorption of around 6.0 million of officials and laborers at the

governmental sector in full occupied posts ( along with, 0.6 million

officials and laborers in the economic authorities ) which secure

safety for about 24 million citizens representing those employees and

their families.

Resumption of granting the social increments for the employees,

since, these accumulated increments constitute a percentage of 320%

of the basic wages beginning from the fiscal year 87/1988 till

-54-

2010/2011, also, they comprise those increments determined as of

April 2011 of 15% of the basic wage, pursuant to the ordinance

NO,2/2011, taking into account the conjunction of those increments

to the basic wage on annual basis, whereas, there will be a

conjunction after the elapse of five years from the timing of the

determination of each of these increments, in practice, the increments

previously determined up to the fiscal year 2006/2007 that amounted

to 250% of the basic wages were added up to the basic wages in the

fiscal year 2011/2012.

There are successive increases in the wage bill defrayed by the

State’s General Budget, for instance, in the F/Y 80/1981 the wage

bill was L.E 1452.6 Million, and in the F/Y 90/1991 it reached L.E

7118.4 Million, then up to L.E 28066.5 Million in the F/Y 2000/2001,

currently they are estimated with 136627 Million in 2012/2013

budget draft.

Without a doubt, that the aforementioned image reflects the

mounting solicitude of the state toward the employees and their families,

also, such image truly express that labor force in Egypt represent a focal

ingredient in the production process…. Also, as the government seeks

the development of the concept of the public employment, then, there

will be a tangible impacts in terms of further pushing of that ingredient

toward more progress and promotion.

The estimated wages in the addressed budget draft are classified to their

basic purposes as following:

-55-

Table No. (12)

Wages and Compensation of Employees





* Permanent Jobs 23.123 16.9 20.673 18.7 2.451 11.9

* Temporary Jobs 2.075 1.5 1.832 1.7 244 13.3

* Rewards 59.008 43.2 36.214 32.8 22.793 62.9

* In-Kind allowances 10.505 7.7 9.706 8.8 800 8.2

* Cash Benefits 10.808 7.9 10.470 9.5 338 3.2

* In-Kind benefits 2.667 2.0 2.474 2.2 193 7.8

* Insurance Benefits 12.508 9.2 10.095 9.1 2.413 23.9

* Other kinds of wages' and contingencies

15.932 11.7 19.034 17.2 -3.101 -16.3

Total 136.627 100.0 110.497 100.0 26.130 23.6

-56-

Purchase of goods and services

The State’s General Budget for the fiscal year 2012/2013

comprises an amount of L.E 28765 Million earmarked for the purchase

of goods and services to manage the government operations comparing

with L.E 29255 million in 2011/2012 revised budget, with a reduction of

L.E 490 million, and a percentage of reduction of 1.7% .

These appropriations represent a percentage of 5.4 %

approximately of the total operating expenditures of L.E 533785 Million

that included in the budget draft, and representing a percentage of 4.5%

of the total budget uses that amounts to L. E 635376 Billion, these

expenditures in principal earmarked for the schools, and hospitals

requirements and others of the governmental agencies, also, they are

earmarked for the periodical maintenance, electricity, and water and

other operating imperative requirements.

The following table indicates the distribution or these

appropriations to their basic components in budget draft, comparing with

2011/2012 revised budget.

-57-

Table No. (13)

Purchase of Goods and Services


Draft Relative weight

Revised Relative weight Value Growth

rate


* Materials (medicine, food and others) 6.361 22.1 5.517 18.9 845 15.3

* Operating fuels, oil, and moving parts 979 3.4 944 3.2 34 3.7

* Fuels and oil for cars 105 0.4 98 0.3 7 7.3

* Spare parts and supplies 935 3.2 900 3.1 34 3.8

* Lighting 3.692 12.8 3.836 13.1 -144 -3.8

* Water 598 2.1 568 1.9 29 5.2

* Maintenance 4.384 15.2 4.117 14.1 267 6.5

* Printing expenses 1.220 4.2 1.166 4.0 54 4.6

* Public transportation and conveyance 2.431 8.5 2.263 7.7 168 7.4

* Mail and communication 349 1.2 358 1.2 -10 -2.7

* Judicial judgment execution expenses 287 1.0 1.986 6.8 -1.699 -85.5

* Purchase of goods and services for special accounts and funds

1.964 6.8 1.943 6.6 21 1.1

* Others 3.962 13.8 4.699 16.1 -737 -15.7

* General contingencies for goods and services 1.500 5.2 859 2.9 641 74.6

Total 28.765 100.0 29.255 100.0 -490 -1.7

-58-

It is noted that the estimated appropriations earmarked for the

purchase of goods and services in the addressed budget draft represent

mainly in the following:

The materials

The appropriations of the raw materials estimated in 2012/2013

budget draft amount to L.E 6361 Million comparing with L.E 5517

Million in 2011/2012 revised budget, with an increase of L.E 844

Million, with an increase percentage of 15.3% .

The raw materials represented in the following requirements

L.E Million

Budget draft revised budget

2012/2013 2011/2012

Medications & vaccinations 3106 2820

Schools & institutes nutrition 2003 1603

Other raw materials for operating 1252 1094 _________________________ 6361 5517 __________________________

-59-

Illumination

The appropriations of the illumination estimated in 2012/2013


Million in 2011/2012 revised budget, with a reduction of L.E 144

Million, and a reduction percentage of 3.8%, of those appropriations, an

amount of L.E 0.95 Billion is representing arrears to the electricity

sector, that countered with an equivalent amount accommodated in the

revenues side to clear cross debt between the governmental agencies and

the treasury dues against the electricity sector.

water

The appropriations of the water estimated in 2012/2013 budget

draft amount to L.E 598 Million comparing with L.E 568 Million in

2011/2012 revised budget, with an increase of L.E 30 Million, and an

increase percentage of 5.3%, to meet the costs of water supply, taking

into account the necessary regulations of the rationalization.

Maintenance costs

The appropriations of the maintenance costs estimated in

2012/2013 budget draft amount to L.E 4384 Million comparing with

L.E 4117 Million in 2011/2012 revised budget, with an increase of

L.E 267 Million, and an increase percentage of 6.5%.

Such costs represented basically in cleaning the means of

irrigation, and drainage, maintaining and restoring buildings and

-60-

constructions, also, maintaining roads and bridges and viaducts,

maintaining equipments, machines, means of transportations and others.

Printing costs

The appropriations of the printing costs estimated in 2012/2013

budget draft that are addressed to your esteemed council amount to

L.E 1220 Million comparing with L.E 1166 Million in 2011/2012

revised budget, with an increase of L.E 54 Million, and an increase

percentage of 4.6%, it is worth mentioning that these costs earmarked

mostly for printing school books.

Transportation

The appropriations of the transportation estimated in 2012/2013


Million in 2011/2012 revised budget, with an increase of L.E 168

Million, and an increase percentage of 7.4%, to meet the normal

growth rates.

These appropriations are represented in the following:

L.E Million

Budget draft revised budget

2012/2013 2011/2012

Cash allowance for the remote areas 1698 1555

Internal transportation allowance 487 461

external transportation allowance 157 156

other 89 91

_________________________

total 2431 2263

__________________________

-61-

Interest

These are the dues interest that are attributed to the government

borrowing, as being one of the sources that the government are resorting

to finance their activities, and mostly they are interest dues on the T.

Bills and T. Bonds either short or long term, or interest dues on loans

utilized to finance the projects stipulated in the state’s public plan.

The appropriations of the interest estimated in 2012/2013 budget

draft amount to L.E 133612 Million comparing with L.E 105300 Million

in 2011/2012 revised budget, with an increase of L.E 28312 Million, and

an increase percentage of 26.9% .

The interest constitutes a percentage of 25 % of the total operating

expenditures of L.E 533785 Million that included in the budget draft,

and representing a percentage of 21.0% of the total budget uses that

amounts to L. E 635376 Billion.

The following table shows the distribution of the domestic and

foreign interest categorized by their types comparing with the projection

of the current fiscal year.

-62-

Table No. (14)

Interest



Revised Relative weight Value Growth

rate


(A) foreign Interest

* Foreign public debt interest 6.003 4.5 4.539 4.3 1.463 32.2

* Foreign interest paid by entities 88 0.1 125 0.1 -37 -29.5

Total (A) 6.091 4.6 4.664 4.4 1.427 30.6

(B) Domestic Interest

- C.B.E bonds 14.032 10.5 11.150 10.6 2.882 25.8

- Treasury bills 52.672 39.4 35.465 33.7 17.207 48.5

- Egypt treasury bonds 33.189 24.8 29.887 28.4 3.302 11.0

- Bonds of banks capital increase 320 0.2 320 0.3 0 0.0

- temporary coverage of debit balances 7.838 5.9 3.000 2.8 4.838 161.3

- Government notes to compensate for the actuarial deficit in social insurance funds

17.600 13.2 16.179 15.4 1.421 8.8

* Local bonds 0 0.0 263 0.2 -263 -100.0

* Other 1.871 1.4 4.372 4.2 -2.501 -57.2

Total (B) 127.521 95.4 100.636 95.6 26.886 26.7

Total 133.612 100.0 105.300 100.0 28.312 26.9

-63-

The abovementioned interest in entirety are imperatives, it is of

importance to note that, these interest that amount to L.E 133612

Million represent a percentage of 7.5% of GDP, the significance of the

highlighting, is to affirm that, while measuring the budget deficit, it

must be referred to what is called the primary deficit, which is defined

as the overall deficit excluding the interest payment, since the budget

overall deficit as a percentage of GDP in the budget draft amounts to

7.6% , while the primary deficit ( excluding the interest payment )

amounts to a percentage of 0.1% of GDP.

Also, it is worth mentioning that, estimates of the interest dues are

calculated based on the actual interest prices imposed on the T. Bills, the

T. Bonds and the matured loans, taking into account the projected

borrowing assumptions during the next period and the coming fiscal

year 2012/2013, also, the calculation is performed based on the expected

prevailed return in the national economy, and considering the

stabilization occurred in the foreign currency market, as well as the

orientation of the Central Bank of Egypt toward supporting the

economic development process.

In addition, it worth recalling that, the interest on the investment

loans that amount to L.E17600 Million are mainly oriented toward to

the pension funds, these payments represent the state’s commitment to a

new approach toward these funds through the cash payment of these

rights to the pension funds ,that constitute the return on investments of

-64-

these funds with the state instead of recapitalizing them with the

National Investment Bank.

However, the great part of the commitments of the National

Investment Bank in favor of the pension and insurance funds have

already been transferred to the public treasury, of an amount equivalent

to the actual indebtedness of the public treasury to the National

Investment Bank, currently the Public Treasury is held responsible

toward these funds for such financing, hence, there have already been an

issuance of T. Bonds on the public treasury that amounted to L.E 204

Billion with an interest rate suitable to the prevailed rate in the market,

this procedure represents an assurance to the rights of the pensioners and

preserving the funds.

Also, the cash payments of these interest dues paid by the public

treasury on the pension funds financing, that have already been

transferred to the public treasury and countered by an issuance of

T.Bonds, have helped greatly these pension funds to be provided with

liquidity and cash flows, the matter that enabled these funds to pay their

pension commitments in full, specially, such commitments are paid on a

monthly basis by the public treasury, that implicitly means the increase

of the real rate paid by the treasury on these T. Bonds, whereas, these

dues should have been paid after the maturity date of 12 month.

However, what is most important is the current auditing between

the Ministry of Finance and the Ministry of Insurance to identify the true

-65-

dues for the pensions funds with the public treasury, the primary

indicators show that the pensions funds dues with the public treasury up

to 30/6/2011 amounts to additional L.E 142 Billion, there was a payment

agreement to the pension funds through issuing ten years T.Bonds on the

treasury with a distinct interest rate.

Hence, the Ministry of Finance has recorded the dues of the

pension funds toward the state which amount of L.E 445 Billion as

following

L.E Billion

T . Bonds 204

Actuarial deficit bonds 2

Treasury T. Bills & T. Bonds 33

Previous years arrears for the 142

Pension funds

---------

Total 381

Dues with the National 64

Investment Bank

---------

Gross 445

---------

-66-

Subsidies, Grants & Social benefits

The appropriations of the Subsidies, Grants & Social benefits

estimated in 2012/2013 budget draft amount to L.E 145838 Million

comparing with L.E 154454 Million in 2011/2012 revised budget, with a

reduction of L.E 8616 Million, and a reduction percentage of 5.6%

approximately.

Such reduction represents the net cutoff of the subsidies

appropriations of the petroleum products, on the light of the suggested

measures to rationalize such subsidy, also the increases in most items

specially the GASC , the matter that will be clearly shown in the

elaboration of the details of the subsidies allocations.

Based on the aforementioned, the Subsidies, Grants & Social

benefits allocated in the 2012/2013 budget draft are represented in the

following:

L.E Million 112987 subsides for goods and services 6013 grants provided for various entities 23908 social benefits for the pension funds and The solidarity funds. 2930 contingencies and other allocations For subsidies -------- 145838 total --------- The following table indicates the distribution of these appropriations to their basic components comparing with 2011/2012 revised budget.

-67-

Table No. (15)

Subsidy, Grants and Social Benefits



Revised Relative weight

Value Growth rate

Million EGP % Million EGP % Million EGP % * Subsidy x To G.A.S.C 26.600 18.2 18.884 12.2 7.716 40.9 x To oil materials 70.000 48.0 95.535 61.9 -25.535 -26.7 x To electricity 5.000 3.4 5.000 3.2 0 0.0 x To exports promotion 3.100 2.1 2.500 1.6 600 24.0 x To farmers 573 0.4 333 0.2 240 72.0 x To agriculture crops 0 0.0 2.000 1.3 -2.000 -100.0 x To Upper-Egypt development 200 0.1 0 0.0 200 0.0 x To industrial zones 300 0.2 100 0.1 200 200.0 - To medicine and baby formula 192 0.1 192 0.1 0 0.0 - To health care for women headed households 120 0.0 0.0 0.0 120 0.0 - To health care for children under school age 156 0.0 0.0 0.0 156 0.0 - To health care for students 230 0.2 230 0.1 0 0.0 x To passengers transport 1.224 0.8 851 0.6 373 43.8 x Soft loans interest subsidy 790 0.5 790 0.5 0 0.0 x Low-income housing subsidy 700 0.5 1.500 1.0 -800 -53.3 - Water corporations 750 0.5 750 0.5 0 0.0 - Cinema 0 0.0 20 0.0 -20 100.0 - Military production 860 0.6 460 0.3 400 87.0 - Training 300 0.2 50 0.0 250 500.0

- Students subscription 400 0.3 200 0.1 200 100.0

- Non-economic lines 500 0.3 400 0.3 100 25.0 - Fund of rapid vehicle transport 245 0.2 244 0.2 1 0.4 - To fund to support mortgage finance 205 0.1 0.0 0.0 205 0.0 - Other 542 0.4 435 0.3 107 24.5 Total Subsidy 112.986 77.5 130.474 84.5 -17.487 -13.4

* Grants 6.013 4.1 6.375 4.1 -362 -5.7

* Social benefits

x Social insurance pension 2.534 1.7 2.434 1.6 100 4.1

x Child's pension 47 0.0 44 0.0 3 6.8

x Contributions to pension funds 20.700 14.2 10.700 6.9 10.000 93.5

x Other 627 0.4 588 0.4 39 6.6

Total Social Benefits 23.908 16.4 13.766 8.9 10.142 73.7 x Lump sum subsidy, grants and social benefits recorded in entities, budgets

430 0.3 407 0.3 23 5.7

* Additional requirements and contingencies 2.500 1.7 3.434 2.2 -934 -27.2

Total 145.837 100.0 154.455 100.0 -8.618 -5.6

-68-

Analyzing the main ingredients of the subsides , grants and social benefits it emerged that: First: subsides ( A ) subsidizing the basic commodities The subsidies of the basic commodities estimates in 2012/2013budget draft amount to L.E 26600 Million, comparing with L.E 18884 Million in 2011/2012 revised budget, with an increase of L.E 7716 Million and percentage of 40.8% The following table indicates the subsidies earmarked for the basic commodities categorized by their components.

-69-

Table No. (16)

Subsidy of Commodities in Budget Draft

For FY 2012/2013


Draft Quantities Revised Quantities Value Growth rate

Million EGP Thousand ton Million EGP Thousand ton Million EGP %

First: Commodities

1- Bread subsidy

- Exported wheat 8.498 6.000 6.498 4.300 2.000 30.8

- Local wheat 7.464 3.000 4.146 3.000 3.318 80.0

- Maize 212 100 176 100 36 20.5

Total bread subsidy 16.174 10.820 5.354 49.5

x vegetable oil 5.512 855 5.077 900 435 8.6

2- Sugar 3.488 1.250 2.998 1.272 490 16.3

3- Rice/ Macaroni 1.400 606 1.216 1.000 184 15.1

- Tea 1 4 4 4 -3 -75.0

Total subsidy of commodities 26.575 20.115 6.460 32.1

Change in inventory 0 -1.083 1.083

Total revenues & expenditures 25 -148 173

Net subsidy of supply commodities

26.600 18.884 7.716 40.9

-70-

( B ) Petroleum products subsidies The Petroleum products subsidies estimates in 2012/2013budget draft amount to L.E 70000 Million, comparing with L.E 95535 Million in 2011/2012 budget, these subsides represent the charges that are beard by the as a result of selling these products with prices lowered than the costs obtaining these products to the domestic market, either through the domestic production or importing part of them from abroad. These subsides have been reduced by an amount of L.E 25535 Million in the current year budget, this is in the context of the orientation toward rationalizing the energy subsidies, and have them confined to the eligible groups through a package of mechanisms that are preventing the leakage of these products to illegal channels of distribution, and applying more developed approach of distribution through the coupons and the smart cards, according to standardized rates for the butane gas, diesel, fuel, meanwhile the acceleration of supplying the natural gas to some industries that are consuming diesel or the other energy products. With completing the system of abolishing the subsides away from those industries with highly consumption the natural gas. The following table shows the determined subsides for the petroleum products in the addressed table

-71-

Table No. (17)

Subsidy of Petroleum Products

For Fiscal year 2012/2013

Product Quantity Costs Sales

revenues Subsidy

Relative weight

%

Natural gas 52914

Million m3

32277 29718 2559 3.7%

Butane 360

Million Cylinder

21960 4199 17761 25.4%

Benzene 7772

Million Liter

31620 17878 13742 19.6%

Solar 16022

Million Liter

62165 26436 35729 51.0%

Kerosene 190

Million Liter

522 313 209 0.3%

Mazot 9.4

Million Ton

21620 21620 0 0.0%

Total 170164 100164 70000 100.0%

-72-

( C ) Electricity subsidies

The 2012/2013 budget draft comprises an amount of L.E 5.0 Billon

to cover the prices differences of the petroleum products utilized in the

electricity production accrued in the previous years, such amount is

countered with an equivalent amount in the revenues side of the budget

that is accommodated in the item of the amortizations dues on the

electricity sector in favor of the public treasury for the on lent loans to

that sector.

( D ) promoting exports subsidies

The 2012/2013 budget draft comprises an amount of L.E 3100

Million to subsidize the Egyptian exports comparing with L.E 2500

Million in 2011/2012 budget, with an increase of L.E 600 Million, and

percentage of 24%.

It is of importance, to assure that this subsidy is not directed to the

exporters, but to subsidize the products that are being exported for the

purpose of encouraging the concurring the external markets.

It is worth mentioning that, the aforementioned subsidies are

financed through some transfers from the exports promoting fund from

each of the ministry of industry and foreign trade and the authority of

controlling exports and imports.

-73-

( E ) peasants subsidy

In the context of state’s fiscal policies targets to alleviate the burdens

from the small farmers, hence, the state subsidies the agricultural inputs

for production of fertilizers, seeds, anti- insects chemicals, and part of

the costs of confronting the agricultural pests, also, contributing to

reducing the seeds costs, in addition to that, providing soft loans for

some agricultural purposes, and treasury takes the interest differences.

So. The 2012/2013 budget draft includes an amount of L.E 572

Million for farmers subsidy.

( F ) Public transportation subsidy

The subsides that are provided for Cairo and Alexandria public

authorities for transportation cover part of the operating deficit resulted

from providing such service with less prices less than the economic

costs, this is for the social dimension purposes for the lower income

earners.

The Public transportation subsidy estimates in 2012/2013budget draft amount to L.E 1223.8 Million, comparing with L.E 850.8 Million in 2011/2012 budget, with an increase of L.E 373 Million, and a percentage of 44% ( G ) Medication and health insurance subsidy The state is working harder, doubling the efforts, to provide the health services in their integrated venues, through promoting the level of performance in these health main agencies that are connected to the

-74-

public health, and enforcing the public hospitals with experts, along with the efforts done to provide the citizens with the medications. The law NO, 99/1992 for the students health insurance stipulates in its third article “the treasury annual contributions one of the financing resources for each student in schools, kindergartens owned by the state and those private schools supported by the state, also the Azhar institutes, these contributions represent direct subsidy from the state for each student with an amount of L.E 12 for a number of 19 Million of students. In addition, the subsidies of the medications and the infants dairy represent the costs that are beard by the state on the price differences to confront the financial losses due to importing the medication and the infants dairy and selling them with a lower prices less than the economic costs, such subsidies are disbursed to the executing agency meaning the Ministry of Health. The medication and the infants subsidies estimates in 2012/2013 budget draft amount to L.E 698 Million comparing with L.E 422 Million in 2011/2012 budget, with a percentage of 65%. ( H ) Industrial zones subsidy The industrial zones subsidy is disbursed to the General Authority for the Industrial development, to meet the infrastructure costs of the industrial zones to enable the authority in achieving its industrial development targets, the goal that will lead to mobilizing the abilities of these industrial zones in attracting the investments and encouraging the competence among them. The industrial zones subsidy estimate in 2012/2013 budget draft amount to L.E 300 Million comparing with L.E 100 Million in 2011/2012budget.

-75-

( I ) water supply subsidy The subsidy of the potable water represent mainly the gap between the expenditures and the revenues of the water companies budgets , so, such subsidy covers the difference between the economic costs of the water supply and the selling prices in conformity with the pre-determined tariffs, hence, and based on the issued decrees of establishing these companies, the public treasury covers these differences in prices to attaining the state's policy to supply potable water to all regions. The water supply subsidy estimate in 2012/2013 budget draft amount to L.E 750 Million, it is the same amount that in included in 2011/2012budget. ( J ) Soft loans interest subsidy The soft loans interest subsidy estimate in 2012/2013 budget draft amount to L.E 790 Million, it is the same amount that included in 2011/2012budget. Hence, the state covers the difference between the loans interest of the soft loans earmarked for the economy housing, and the soft lending for the vulnerable families, as well as the export oriented projects and others, in addition, these interest differences on the stock of these loans of the previous years. ( K ) lower income earners housing subsidy The Ministry of Finance is targeting to provide the financial appropriations to finalize and delivering the all units of the national housing project of the lower income earners, a sum of L.E 700 Million was appropriated for this purpose in 2012/2013 budget draft, for the purpose of completing all the obligations of this project.

-76-

( L ) Upper Egypt development subsidy In the context of the state's continuous efforts to support the development of the upper Egypt, the 2012/2013 budget draft includes an amount of L.E 200 Million earmarked for such purpose. ( M ) students rail ways tickets, and governorates' non economic lines subsidies In the context of reforming the financing structural distortion of the railway authority of Egypt, as a result of the financial burdens taken by the public treasury generated from subsidizing the rail way tickets of the students , and the other groups with prices much less than the real costs. In addition, the other losses taken by the authority which resulted from the non economic lines in the governorates, so, it is decided that the public treasury to contribute to covering the differences between the actual operating costs and the subsidized subscriptions of the students and the other groups of an amount of L.E 400 Million, in addition to L.E 500 Million to meet the authority losses incurred because of operating non economic lines in the governorates. Hence, the budget draft addressed to your esteemed council includes an amount of L.E 900 Million earmarked for subsidizing the railway utility to enable that authority in the fulfillment providing the citizens with the service in particular those groups of the low incomes. ( N ) vehicles' purchase financing fund The prime-ministerial decree NO, 470/2009 was issued of the establishment of a fund for financing the purchase of vehicles, the purpose of such fund is to replace the old taxis with a newer ones , against a payment of the general sales tax and the customs duties determined on each car with an amount equivalent to L.E 5000 and L.E 8000 progressively , so, the budget draft addressed includes an amount of L.E 245 Million for that purpose.

-77-

Second : Grants, aids and social benefits The Grants, aids and social benefits estimates in 2012/2013budget draft amount to L.E 32851.2 Million, represented mainly in the following :

1- The grants and aids provided by countries for human and social purposes amount to L.E 6013 Million distributed as following: L.E Million

Medical treatment for citizens, kidney failure, ambulances 3057

Aids from the endowments yields. 691

Aids for youth and sports 407

Aids for displaced and soldiers families, monthly donations provided for the vulnerable

families and others. 261

Donations for Azhar Institutes, primary Azhar schools students, Quran offices, and the

foreign azhar students. 78

Bounces of retirement of journalists, aids for solving problems of news agencies, provision

for Middle East news agency and the national company for distribution . 104

Donations for social cars funds for the workers and the syndicate of commerce and others.

417

Donations for cultural external relations, and the fund of supporting high institutes and the

teachers syndicate. 18

Cultural development fund. 13

Foreign affairs buildings fund. 16

Donation fund for African countries. 80

Donation fund for the commonwealth countries. 30

Aviation supporting fund. 496

Others. 417

total 6013

-78-

It is noted that, part of these grants and aids have a counterpart on the revenues side, for instance, the endowment yields.

2- The social benefits for the pension funds and the social solidarity that

amount to L.E 20700 Million represent the state contributions to the

pension funds to help these fund to pay the determined pensions for

the pensioners, in addition to providing the solidarity pensions for the

vulnerable families.

3- Provisions of the solidarity pension and the child pension and others

estimated with L.E 2658 Million.

4- Other social benefits estimated with L.E 550 Million .This in addition

to the appropriations amounted to L.E 2930 Million that are included

of the extra demands and the contingencies accommodated in the

governmental budgets. In 2012/2013 budget draft, to confront the

unpredicted needs during a year time for the subsidies, grants, and

social benefits, that are distributed as following:

L.E Million

General contingencies 2500

One line item 430

____

Total 2930

_____

-79-

The other Expenditures

The other expenditures estimates in 2012/2013budget draft amount to L.E 33324.9 Million, comparing with L.E 31122.3 Million in 2011/2012 revised budget, with an increase of L.E 22202.6 Million, and a growth percentage of 7%. These expenditures represent the imperatives related to the national demands and the current and the ad hoc transfers and the contributions to the authorities, agencies and the compensations and the fines and others.

The purchase of non financial assets ( Investments )

The purchase of non financial assets ( Investments ) estimates in 2012/2013budget draft amount to L.E 55618 Million approximately, comparing with L.E 45661 Million in 2011/2012 revised budget, with an increase of L.E 9957 Million, and a growth percentage of 21.8%. In general, such appropriations have been distributed in 2012/2013 budget draft to the budget agencies as follow: table 18 – purchase of non financial assets ( investments ) Value %

- Central administration 26738 48.1 - Local administration 3461 6.2 - Public service authorities 24619 44.3 - Compensations for price

differences for contractors 150 0.3 - contingencies 650 1.1

total 55618 100 the next table shows the investment distribution to basic ingredients

-80-

Table No. (19)

Investments and Main Components

(Million EGP)

2011/2012 Change

Description 2012/2013 Budget Draft (1)

Budget (2)

Revised budget (3)

(1‐2) (1‐3)

* Building and constructions

x dwellings 7.103 5.150 5.150 1.954 1.954

x Non‐residential buildings 12.450 10.514 10.514 1.936 1.936

x Constructions 17.647 18.513 17.694 ‐866 ‐48

Total 37.200 34.176 33.358 3.024 3.842 x Machinery, equipments and

means of transportation

x conveyance 1.058 452 452 605 605

x Means of transportation 155 46 46 110 110 x Machinery and equipments 9.284 6.783 6.783 2.500 2.500 ‐ Tools 163 138 138 25 25 x Other equipment 1.381 1.171 1.171 210 210

Total 12.041 8.590 8.590 3.450 3.450

* Other fixed assets:

x cultivated resources 57 35 35 21 21

Total 57 35 35 21 21

Total fixed assets 49.297 42.802 41.984 6.495 7.313

* Natural assets

x Purchase of lands 922 350 350 572 572

x Land reclamation 23 315 315 ‐292 ‐292

Total 945 665 665 280 280

x Interest previous to operating 60 11 11 49 49

x Scholarships 792 716 716 77 77 x Research and feasibility studies

for investment projects 2.185 1.737 1.085 449 1.100

x Advanced payments 1.538 481 481 1.058 1.058 x Price deffrential

compensation for contractors

150 150 150 0 0

x General contingencies 650 600 570 50 80

Total Investments 55.618 47.161 45.661 8.457 9.957

-81-

( B ) The functional classification of the expenditures

The fourth article of the State’s General Budget law NO, 53/1973,

amended by the law NO, 87/2005 stipulates that “ the State’s General

Budget is prepared and executed in conformity with the economic

classification of the different activity aspects of the state and the

administrative classification of the agencies, also it is presented based on

the functional classification of the state’s activities.

I have addressed to you your esteemed council the expenditures of

2012/2013 budget draft, totaled L.E 533785 Billion distributed

economically on the various state's aspects , hence, the different budget

chapters were explained, meaning the wages, purchase of goods and

services, interest, subsidies, grants, and social benefits, purchase of non

financial assets ( investments ).

Hence, based on the commitment of enforcing the budget law. I am

honored to address to your respected council the budget expenditures

totaled L.E 533785 Billion functionally distributed to the different state's

activities of public services, public order, economic affairs, environment

protection, housing and utilities, health, youth, cultures, religion affairs,

education, social protection.

The tables numbers 20 and 21 elaborate the appropriations

earmarked for the aforementioned activities, that are included in the

2012/2013 budget draft comparing with 2011/2012 budget.

-82-

Table No. (20)

Functional Classification for the State's

Expenditures According to the State's Activities

(Million EGP)

2011/2012 Change

Functional Activity

2012/2013

Draft

(1)

Budget

(2)

Revised

(3) (1‐2) (1‐3)

= Public services 183.041 163.295 156.209 19.746 26.832

= Public order and public

security affairs 26.331 22.722 22.023 3.609 4.308

= Economic affairs 31.562 24.614 23.887 6.948 7.675

= Environmental protection 1.257 1.284 1.251 ‐27 6

= Housing and community

utilities 17.185 16.773 16.446 411 739

= Health 27.413 23.783 23.141 3.630 4.272

= Recreation, culture, religious

affairs 20.366 15.865 15.453 4.501 4.913

= Education 64.034 51.771 49.899 12.263 14.135

= Social protection 135.068 145.003 142.509 ‐9.935 ‐7.441

= Various functional activities 27.529 25.480 25.472 2.049 2.057

Total 533.785 490.590 476.290 43.196 57.495

-83-

Tab

le No. (21)

Exp

end

iture A

ccordin

g to Fu

nction

al Classification

B

y Bu

dget's C

hap

ters S

tate's Gen

eral Bu

dget D

raft FY

2012/2013

(M

illion E

GP

)

2012/2013 2011/2012

2010/2011

Fu

nction

al Activity

Wages an

d C

omp

ensat

ion of

emp

loyees

Pu

rchase of

goods

and

services

Interest

Su

bsid

y, gran

ts an

d social

ben

efits

Oth

er exp

end

itures

pu

rchase of n

on -

financial assets "

investm

ents"

Draft

Bu

dget

Revised

A

ctual

* Pu

blic services

25.795 9.527

133.3203.425

3.274 7.700

183.041 163.295

156.209 117.881

* Pu

blic ord

er & n

ational secu

rity affairs 21.048

2.098 0

389 870

1.926 26.331

22.722 22.023

20.723

* Econ

omic affairs

10.425 3.372

143 3.714

666 13.242

31.562 24.614

23.887 25.253

* En

vironm

ental p

rotection

456 518

0 4

1 278

1.257 1.284

1.251 1.158

* Hou

sing &

comm

un

ity utilities

692 245

94 209

33 15.912

17.185 16.773

16.446 12.802

* Health

13.342

6.151 19

3.146 233

4.522 27.413

23.783 23.141

20.278

* Recreation

, cultu

re & religiou

s affairs 12.589

1.541 1

1.567 666

4.002 20.366

15.865 15.453

14.978

* Ed

ucation

50.585 5.213

35 160

273 7.767

64.034 51.771

49.899 48.214

* Social p

rotection

1.613 66

1 133.224

1 164

135.068 145.003

142.509 113.856

* Oth

er function

al activities 83

33 0

0 27.308

105 27.529

25.480 25.472

26.724

Total

136.628 28.764

133.612145.838

33.325 55.618

533.785 490.590

476.290 401.867

-84-

Table No. (22)

Public Revenues

Third : the detailed estimates of the public revenues in 2012/2013budget

draft

The public revenues estimates in 2012/2013 budget draft around

L.E 393476 Billion comparing with L.E 349647 Billion in 2011/2012

budget, with an increase of L.E 43829 Billion, and percentage of 12.5%

Generally, these revenues represented mainly in the following:



Revised budget

Relative weight Value Growth

rate


* Tax Revenues 266.905 67.8 232.232 66.4 34.673 14.9

* Grants 9.021 2.3 9.974 2.9 -952 -9.5

* Other Revenues 117.549 29.9 107.441 30.7 10.109 9.4

Total 393.476 100.0 349.647 100.0 43.829 12.5

-85-

We will tackle hereunder the main three components or the three

chapters that constitute the public revenues:

tax revenues

grants

non tax revenues

these public revenues that amount to L.E 393476 Billion cover a

percentage of 73.7 of the magnitude of the public expenditures totaled

L.E 533785 Billion.

The tax revenues

Tax revenues are considered the most important financing

element for the budget, as they constitute real resource that contribute to

financing the growing public disbursement carried out by the state in the

various aspects of spending, such resource helps in reducing the

financing burdens on the public treasury, from the other side, the taxes

are viewed as one of the most significant fiscal policy tools used by the

state to achieve the social and economic development plan, in the

context of considering the social dimension.

These revenues are represented in the total tax proceeds collected

by the state in conformity with the laws, and the obligatory regulations

or related to these taxes, either they were income tax general sales tax,

customs fees or other taxes.

-86-

The tax revenues estimates in the 2012/2013 budget draft amount to

L.E 266905 Billion comparing with L.E 232232 Billion in 2011/2012

budget.

Hence, there in estimates increases of in the budget draft amount to

L.E 34673 Billion, with percentage of 14.9%

The following table shows the evolution of the tax proceeds across

the previous years comparing with 2012/2013 budget draft estimates.

-87-

Table No. (23)

Development of Tax Revenues

(Million EGP)

Fiscal years Estimates Actual Growth rate of

previous year

(estimates) %

2004/2005 79.842 75.759 20.5

2005/2006 81.607 97.779 2.2

2006/2007 105.645 114.326 29.5

2007/2008 120.824 137.195 14.4

2008/2009 166.570 163.222 37.9

2009/2010 145.544 170.494 -12.6

2010/2011 200.424 192.072 37.7

2011/2012 232.232 15.9

Draft 2012/2013 266.905 14.9

-88-

In this regards, taxes could be divided into direct and indirect taxes

as elaborated below:

Direct taxes

The direct tax are imposed on the income gains, where the tax

burden can't be transferred to the others, as they represent a direct

liability on the income earners, the main ingredients of the direct taxes,

the taxes imposed on the incomes, profits, and capital gains those

comprise the taxes imposed on individuals income and taxes on the

corporate profits.

The indirect taxes

These are the taxes that are imposed on the income transactions, -

the income usage – so, the tax burden is being laid on the final consumer

of such goods and services, the most significant type are the taxes

imposed on the goods and the services ( the General tax that is imposed

on the sales and the services , the taxes imposed on the domestic goods

and the foreign goods , stamp tax, surcharge fees, social solidarity tax,

entertainment tax, international trade tax, customs)

The aforementioned table indicates the positive evolution of the

tax collection performance, it is emerged that the tax collection started to

perform positively as of the fiscal year 2005/2006

In general , the tax revenues estimates in the budget draft are

categorized into the following main components:

-89-

Table No. (24)

Components of Tax Revenues

(Million EGP)

2012/2013 2011/2012 Description Budget

Draft Budget

Revised

Budget

2010/2011

Actual

- General Taxes 150.039 130.726 130.726 104.914

- Sales Tax 83.485 72.118 72.118 64.440

- Custom Taxes 20.759 18.002 18.002 13.858

- Other Tax Revenues 12.622 11.387 11.387 8.860

Total 266.905 232.232 232.232 192.072

-90-

With addressing the components of the tax revenues, it is emerged that:

A- taxes on incomes, profits and stamps

The income taxes imposed on the incomes, profits, and the stamp

tax the basic components in the tax revenues, whereas, the

estimates of these types amount to L.E 150039 Million

representing 56.2% of the total public revenues that are amounted

to L.E 266905 Million .

from the other hand, the taxes imposed on the incomes, stamps

constitute a percentage of 38.1 % of the total public revenues that

are amounted to L.E 393476 Million, and most importantly, that

these taxes that are amounted to L.E 150039 Million covers around

28.1% of the public disbursement totaled around L.E 533785

Million.

The following table illustrate the distribution of the taxes on

incomes, profits stamp tax ( the income tax ) to their components

-91-

Table No. (25)

Income Tax

(Million EGP)

2012/2013 2011/2012 2010/2011Description Budget

Draft Budget Revised Budget Actual

First: Tax on natural individual incomes

Tax on Salaries & the equivalent 18.321 15.000 15.000 11.247

Tax on industrial & commercial profits 8.500 7.651 7.651 5.163

Tax on professional non‐ commercial activity

581 429 429 314

Real estates tax 98 93 93 177 Total 27.500 23.173 23.173 16.901

Second: Tax on corporate profits:

EGPC 45.816 50.569 50.569 34.308 Suez Canal 14.095 12.805 12.805 10.900 Other corporations 29.829 20.554 20.554 25.330

Total 89.740 83.929 83.929 70.538

Third: Tax on movable capital

From CBE 4.323 3.568 3.568 3.093 From Commercial

Banks 66 66 66 9

Total 4.388 3.633 3.633 3.102 Fourth: Stamp taxes : Stamp duty on salaries 2.514 2.470 2.470 2.146 specified stamp 8.568 5.810 5.810 5.065

Total 11.082 8.280 8.280 7.211 Fifth: Other Taxex: Social solidarity 319 310 310 195 On bonds and bills 14.854 10.497 10.497 6.711 Capital profits 0 750 750 0 Other 2.156 153 153 257

Total 17.329 11.710 11.710 7.163

Total General Taxes 150.039 130.726 130.726 104.914

-92-

The aforementioned illustrative table shows that

- taxes on the individuals that are representing in the salaries tax,

industrial and commercial profits, profession activity tax, real

estate tax are amount to L.E 27500 Million, representing 18.3% of

the total income tax estimated to be collected that amount to L.E

150039 Million.

- Corporate profits tax ( legal entities ) that is amounted to L.E

89740 Million represent 59.8% of the total proceeds that are

estimated to be collected of the total income tax that is amounted

to L.E 150039 Million. The corporate profits tax include the

petroleum and Suez Canal taxes, in addition, the other public and

private companies.

- The stamp tax imposed on either the salaries or the specific stamp

estimated with L.E 11082 Million represent a percentage of 7.4%

of the total estimates of the income taxes that is amounted to L.E

150039 Million.

- The tax collection includes among which L.E 14854 Million

represents the return on the T. Bills and the T. Bonds in conformity

with the law , these are the collected interest among the tax

revenues, this tax is modernized by the law NO, 114/2008

-93-

The General Sales Tax

The general sales tax estimates in 2012/2013 budget draft amount

to L.E 83485 Million comparing with L.E 72118 Million in 2011/2012

budget.

Such tax represents a percentage of 31.3 % of the total tax

revenues estimated with L.E 266905 Million, also they are representing

a percentage of 21.2% of the public revenues that are amounted to L.E

393476 Million, and most importantly, that these taxes are covering a

percentage of 15.6% of the total public disbursement that amount to L.E

533785 Million.

-94-

Table No. (26)

General Sales Tax

(Million EGP)

2012/2013 2011/2012 Description

Budget Draft

Budget Revised Budget

2010/2011Actual

* General Tax on Sales

x Domestic goods 19.638 15.297 15.297 12.923

x Imported goods 23.923 21.838 21.838 18.950

Total 43.561 37.135 37135 31.873

* Excises on goods of (Table 1)

(Domestic and imported)

x Tobacco & cigarettes 18.905 16.015 16.015 14.105

x Petroleum products 7.270 6.689 6.689 8.093

x Other 1.236 864 864 979

Total 27.411 23.568 23.568 23.177

* On Services

x International & local communication services

5.245 4.602 4.602 3.882

x Operating services for others 4.607 3.595 3.595 3.020

x Tourist, hotel and restaurant services 2.143 2.722 2.722 2.082

x Other 518 497 497 408

Total 12.513 11.416 11.416 9.391

Total Sales Tax 83.485 72.118 72.118 64.440

-95-

3 – the taxes and the customs fees

The taxes and the customs fees estimated in 2012/2013 budget

draft with L.E 20759 Million approximately comparing with L.E 18002

Million in 2011/2012 budget.

Meaning that, the budget draft estimates will be more higher than the

current revised budget with L.E 2757 Million , a percentage of 25.3%

In general, the taxes and the customs fees in 2012/2013 that

amount to L.E 20759, represent around 7.8% of the total tax revenues

that amount to L.E 266905 Million.

Also, they are representing a percentage of 5.3% of the total public

revenues that amount to L.E 393476 Million, and most importantly, they

are representing a percentage of 309% of the public disbursement.

The following table illustrates the estimates of the taxes and customs

fees

-96-

Table No. (27)

Taxes and Custom Duties

(Million EGP)

2012/2013 2011/2012 Description

Budget Draft


2010/2011Actual

* Taxes on Imports

- Valued customs taxes (other than petroleum) 16.911 15.138 15.138 11.397

- Customs duties on petroleum products 2.799 1.717 1.717 1.600

Total 19.710 16.855 16.855 12.997

Taxes on imported cigarettes and

tobacco 590 549 549 458

Total taxes on imports 20.300 17.404 17.404 13.455

* Taxes on international trade

- On exports 300 400 400 289

- Customs taxes to promote maritime

transport 28 28 28 0

- Revenues of fines 100 110 110 90

- Revenues of seizures 31 60 60 24

Total taxes on international trade 459 598 598 403

Total Custom Taxes 20.759 18.002 18.002 13.858

-97-

On viewing the customs tax, such view should not be confined to

either the collection perspective only, even though, such collection

constitutes a considerable share of the public revenues ,or its

contribution to cover the public disbursement , but we must extend our

observation to the economic impact, as it is one of the important fiscal

tools that is utilized production increase and supporting the national

industries and achieve the equitable competence.

Hence, the steps that have already been taken to reform the customs

tax and restructuring the customs tariffs as of 2004, that ended with the

these amendments introduced in conformity with the presidential decree

NO, 51/2009, these reforms have enabled the customs tariff structure to

mitigate the burdens carried by the producers and exporters, who are

using the intermediaries in their production and activated the exports

from one side , and controlling and organizing the imports movement

from the other side.

Also, there is a protocol of cooperation signed with China for

exchanging the information of the true values of goods, and

consequently, downsizing the problems of forgery invoices .

4 – Other taxes

The other tax revenues represent complementary element in the

taxation system previously mentioned, which constitute the taxes

imposed on the incomes, profits, stamps, sales tax , customs duties, the

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other taxes represent mainly the surcharges fees, real estate taxes

imposed on the land, buildings, consulate fees and others.

Hence, the other taxes estimates in 2012/2013 budget draft

amount to L.E 12622 Million, with an increase of L.E 1236 Million

more than 2011/2012 revised budget, and a percentage of 10.9%.

The other tax revenues represent a percentage of 4,7% of the total

tax revenues that are amount to L.E 266905 Million in 2012/2013

budget draft, and constitute a percentage of 3.2% of the public revenues

that amount to L.E 393476 Million in the budget draft. Also the other tax

revenues cover a percentage of 2,4% of the public disbursement that

amount to L.E 533785 Million.

The following table shows the distribution of the other tax revenues.

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Table No. (28)

Other Tax Revenues

(Million EGP)

2012/2013 2011/2012 Description

Budget Draft


2010/2011Actual

* development Fees 5.311 3.823 3.823 3.434

* Royalties on Suez-Canal 1.876 1.691 1.691 1.402

* Fees on consular procedures 1.250 1.100 1.100 732

* fees on ports 951 945 945 816

* lands tax 252 474 474 178

* Tax on buildings 752 1.180 1.180 139

* Property transfer fees 700 649 649 612

* Crossing fees (Sumid) 300 236 236 400

* Administrative expenses of imports

processes 418 418 418 456

* Fees on work permits 150 150 150 124

* Other tax revenues 663 721 721 566

Total 12.622 11.387 11.387 8.860

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( B ) the grants

They are non obligatory transfers received by governmental

entities from three main resources, the foreign governments,

international organizations and governmental units within the general

government sector, these grants classified based on the nature of the

activities these grants finance, meaning, current and capital grants.

The grants estimates in 2012 / 2013 budget draft amount to L.E

9021 Million approximately, categorized into current and capital grants,

comparing with L.E 9974 Million estimated in 2011/2012 budget

Hence, the grants estimates in 2012 / 2013 budget draft are less

2011/2012 revised budget by L.E 953 Million, with reduction percentage

of 9,6%

These grants constitute percentage of 2.3% of the total public

revenues that amount to L.E 393476 Million, also they are covering a

percentage of 1.7% of the public disbursement that amount to L.E

533785 Million.

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( c ) The other revenues

The other revenues estimates ( excluding tax revenues and grants )

in 2012/2013 budget draft amount to L.E 117549 Million approximately,

comparing with L.E 107441 Million in 2011/2012 revised budget, with

an increase of L.E 10108 Million, and percentage of 9.4%

Also, the other revenues estimates in 2012/2013 budget draft that

amount to L.E 117549 Million approximately, represent a percentage of

29.9% of the total public revenues that amount to L.E 393476 Million ,

also, they are covering a percentage of 22 % of the public disbursement

that amount to L.E 533785 Million.

In general, the other revenues are mainly focused in petroleum and

Suez canal surpluses and the surpluses of the economic authorities, also,

corporate profits , in addition to some other non tax revenues as

illustrated in the following table

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Table No. (29)

Other Revenues

(Million EGP)

2012/2013 2011/2012 Description

Budget Draft Budget Revised

Budget

2010/2011Actual

* EGPC Dividends 25.986 37.770 37.770 21.010 * SCA Dividends 18.636 16.951 16.951 15.252 * Other economic authorities 2.908 1.919 1.919 1.287 * Companies Dividends 6.046 5.514 5.514 3.266 * C.B.E Dividends 10.800 2.570 2.570 498 * Available resources for financing investments 9.856 14.002 14.002 8.355

* Revenues of special funds and accounts 11.924 10.376 10.376 13.741

* Judicial fees and penalties ♦ 1.680 1.663 1.663 1.050

* Government services returns 3.478 3.137 3.137 2.489

* Received interests 1.784 1.653 1.653 1.130

* Petroleum royalty 2.933 3.155 3.155 1.465

* Differences in gas prices 0 1.200 1.200 100

* The mobile phone licenses returns 0 0 0 -2.912

* Cement & iron licenses returns 400 264 264 0

* Proceeds from the sale of urban communities land sales 8.220 96 96 167

* gold royalty 120 38 38 0

* Compensations and fines 8.002 630 630 640

* Other 4.777 6.503 6.503 3.390

Total 117.549 107.441 107.441 70.928

♦ Have offset in different expenditures' chapters.

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Chapter 4 Social Dimension

In Draft of the General State's Budget

For fiscal year 2012/2013 ----

Honorable/ President of the people assembly

Ladies and Gentlemen, Members of the Esteemed Assembly

The estimations of the draft State’s General Budget for FY

2012/2013 reflect the state's concern for the social aspects that touches

the majority of citizens in Education, health, subsidy and supporting the

pension system and social insurance and other various social services.

The draft of State’s General Budget for FY 2012/2013 has allocated

about 284.79 Billion EGPfor social dimension requirements against

268.9 Billion EGP in current Fiscal year, with an increase amounted by

15.8 Billion EGP, by 5.9%.

The appropriations that allocated for social aspects amounted by

284.7 Billion EGP, representing 53.3% of expenditures of General

State’s Budget that amounted by 533.7 Billion EGP.

Education

The draft of State's General Budget for FY 2012/2013 includes 64.5

Billion EGP for Education compared with 51.3 Billion EGP in current

FY 2011/2012, by an increase of 13.2 Billion EGP by growth rate of

25.7%, therefore this sector capture 12% of expenditure in the draft of

State's General Budget that amounted by 533.7 Billion EGP, also

representing 3.6% of GDP, which shows the state's concern for this vital

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sector, as worth-telling that rationale that targeted by the state's general

budget for subsidy of petroleum products.

Health

The draft of State's General Budget includes about 28.6 Billion

EGP for Health compared with 24.2 Billion EGP in current FY

2011/2012, by an increase of 4.4 Billion EGP by growth rate of 18,2%.

Thus, this sector absorbs 5.4% of total expenditures included

in draft budget that amounted by 533.7 Billion EGP as represents

1.6% of GDP.

Subsidy In the frame of social protection of low-income and providing the

requirements of necessary subsidy for citizens, food commodities,

petroleum products, low-income housing, export promotion, industrial

development and others, so, the draft of the state's General Budget for

FY 2012/2013 includes around 113.0 Billion EGP for this purpose,

representing 21.2% of total expenditures amounted by 533.7 Billion

EGP, as subsidy represents 6.3% of GDP.

Support the pensions, social solidarity system and others

The draft of the state’s General budget includes around 50.4 Billion

to support pensions, social solidarity system, and other aids against 40.1

Billion EGP with an increase of 10.3 Billion EGP by growth rate 25.7%.

These appropriations represent 9.4% of expenditures amounted by

533.7 Billion EGP, as represent 2.8% of GDP.

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Other Social Services

The draft of the General Stat's Budget allocated 28.2 Billion EGP

against 22.9 Billion EGP in current FY 2011/2012 with an increase of

5.3 Billion EGP of growth rate 23.1%.

These appropriations included mainly 7.8 Billion EGP for social

housing program, as the allocated appropriations for social services for

youth, culture and religious affairs.

These appropriations represent 5.3% of expenditures amounted by

533.7 Billion EGP, as represent 1.6% of GDP.

Table no. (30) Shows the appropriations allocated for the above

mentioned social dimension.

As shown in Table No (31) the amount of appropriations of social

dimension attributed to total public spending in draft budget after

neutralization of the impact of interests and installments related to public

debt of these expenditures.

.

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Table no. (30)

The following table shows the appropriations that allocated in the

draft of the State's General Budget for FY2012/2013 to achieve social

dimension in the framework of social and financial policy in state. (Million EGP)

Draft Budget 2012/2013

Revised Budget 2011/2012 Description

Subtotal Total Subtotal 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.

64484.0 51264.0

Health Provision 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 (230 million EGP), as well as medicine of (192 million EGP), health insurance on family supporting women by 120.0 million EGP, subsidy of children under school age by 156.0 million EGP.

28611.0 24171.0

Subsidy To subsidize basic & additional supply commodities and petroleum products, of which diesel, butane, 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.

112986.5 130473.4

* Enhancing and supporting pension and social solidarity systems.

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 Treasury contributions to enhance pensions funds. Social solidarity pension for poor families Child pension.

17600.2 20700.0 3333.5

47.0 8770.7

50451.4

16178.9 10700.0 2433.5

44.0

10803.5

40115.9

Other social services: Social housing program.

Youth, culture and religious affairs.

7800.0

20366.0

28166.0 7000.0

15865.0

22865.0

Gross Total 284698.9 268889.3

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Table no. (31)

The amount of appropriations of social dimension attributed to total

public spending in draft budget after neutralization of the impact of

interests and installments related to public debt of these expenditures.

(Million EGP)

Description Draft

Budget 2012/2013

Budget 2011/2012

Education Sector 64.484.0 51.264.0

Percent to net public spending 15.8% 13.7%

Health Sector 28.611.0 24.171.0


Subsidy 112986.5 130473.4


Support pensions system and social solidarity and others.

50.451.4 40.115.9


Other Social services 28.166.0 22.865.0


Total 284.698.9 268.889.3


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Chapter 5 The Basic Fiscal equilibrium

For the Draft Budget In the Fiscal Year 2012/2013

---- Honorable/ President of the people assembly


According to the previous presentation of analyzing the revenues and expenditures elements of the draft of the State’s General Budget for the fiscal year 2012/2013, the following picture shows clearly on how to accomplish fiscal equilibrium for the draft of the state's general budget:

(Million EGP)

Expenditures

Expenditures in the draft of the State’s General Budget consist of wages,purchase of goods and services, interests on loans, subsidy, grants and sociabenefits, other expenses and the purchase of non-financial assets,“investments.”

533.785

Revenues

Revenues in the draft of the State’s General Budget consist of: taxrevenues, grants, non-tax revenues of surpluses and profits, and revenues fromservices offered by the State and others.

393.476

Cash deficit of the budget It results from the inability of available revenues to cover public expenditures; agap that represents a cash deficit in the State’s General Budget.

140.309

Net Acquisition of financial assets This represents what is paid by the Public Treasury of contributions or what itlends, minus what it is collected of revenues due on such holdings as paymentof loan installments.

(-) 5.314

Overall deficit of budget It represents the cash deficit of the budget, plus or minus net acquisition of financial assets. This deficit requires searching for sources of finance.

134.995

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As the revenues and expenditures elements were analyzed previously. The other related elements, meant to realize the fiscal equilibrium for the State’s General Budget, should also be analyzed. These include:

Cash deficit;

Net acquisition of financial assets;

Overall budget deficit;

Measures to finance deficit in the State’s General Budget;

Public debt position.

First: The cash deficit:

The explicit cash deficit in the draft budget in the fiscal

year2012/2013 represents the gap between the expenditures from one

side and the available revenues on the other side.

This gap estimated in the draft budget at approximately 140.309

million EGP represents 7.9% of the total targeted GDP for this fiscal

year. 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

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their risks; nonetheless, they are necessary to reduce the need for new

loans and to decrease public debt.

Second: Net Acquisition of the 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, that constitute an additional burden added to the cash

deficit of the State’s General Budget.

On the other hand, the generated Proceeds from repayment of

lending and sales (without the privatization proceeds) are excluded from

the cash deficit.

Net acquisition of financial assets represents both the acquisition

of financial assets in addition to the revenues generated. In the draft of

State’s General Budget, this is estimated at EGP (5,314 )m., against EGP

(6,663) m. in the 2011/2012 budget.

The following table illustrates the main elements under the “Net

Acquisition of Financial Assets” after excluding the Privatization

Proceeds which is considered financing elements according to

international standards and treasury contributions in the “Restructuring

Fund”, which is treated with the same perspective:

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Table no. (32)

Net Acquisition of financial assets

(Million EGP)

2012/2013 2011/2012 Change Draft

Budget Budget Revised Budget

Description

(1) (2) (3) (2-1) (3-1)

Acquisition of financial assets

Represents mainly in Shares and Other Equity in authorities and corporations, and Lending to some

entities.

8.074 4.306 4.306 3.768 3.768

Excluded

* Treasury contribution in the fund of

restructuring finance

250 250 250 0 0

Net 7.824 4.056 4.056 3.768 3.768

Repayment to government of loans and sales of financial assets Represent mainly in Repayment to government of loans، and Sales of shares and other equity from

authorities and corporations.

13.638

11.219

11.219

2.419

2.419

Excluded

Privatization Proceed 500 500 500 0 0

Net 13.138 10.719 10.719 2.419 2.419

Net Acquisition of financial assets 5.314- 6.663- 6.663- 1.349 1.349

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Third: The Overall Deficit of the Budget:

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 2012/ 2013 draft General Budget at EGP

134,995 m., against EGP 119,980 m. in the revised budget for FY

2011/2012, with an increase of EGP 15,015 m., i.e. 12.5 %. The overall

deficit, in the submitted draft budget, represents 7.6 % of GDP, is less

than the overall deficit in the revised budget for current year 2011/2012

that amounted7.8% of GDP, as evident in the following table:

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Table no. (33)

Overall Deficit

(Million EGP)

2012/2013 2011/2012 2010/2011 Description

Draft Budget Budget Revised

Budget Actual

* Expenditures 533.785 490.590 476.290 401.866

* Revenues 393.476 349.647 349.647 265.286

Cash Deficit 140.309 140.943 126.643 136.580

Net Acquisition of Financial Assets 5.314- 6.663- 6.663- 2.120-

Overall fiscal Deficit 134.995 134.280 119.980 134.460

G.D.P. 1.778.000 1.570.000 1.529.900 1.371.800

Revenues as a percentage of G.D.P. 22.1% 22.3% 22.9% 19.3%

Expenditures as a percentage of G.D.P. 30.0% 31.2% 31.1% 29.3%

Cash Deficit / Surplus (as a percentage of G.D.P.)

7.9% 8.9% 8.2% 10.0%

Overall fiscal balance as a percentage of G.D.P.

7.6% 8.6% 7.8% 9.8%

-114-

Fourth: Measures to Finance the Overall 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 134.995 m. in the draft budget. It extends to seeking sources of

finance to cover domestic and foreign loan installments, estimated at

EGP 93.517 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.

Accordingly, net borrowing required by the budget in the next

fiscal year 2012/2013, amounts to approximately EGP 134.745 m.,

against a projected EGP 119.730 m. in the revised budget for FY

2011/2012, with an increase of EGP 15.015 m., as shown in the

following table:

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Table No. (34)

Net Borrowing and Financing Sources

(Million EGP)

2012/2013 2011/2012 Description

Budget Draft Budget Revised Budget

2010/2011

Actual

Overall deficit 134.995 134.280 119.980 134.460

Adding:

Payment of domestic and foreign loans' installments

93.517 99.144 99.144 32.174

Total Funding 228.512 233.424 219.124 166.634

Excluding:

Reduction of public debts which equals the paid installments

93.517 99.144 99.144 32.174

Net privatization proceed 250 250 250 22

Net Borrowing 134.745 134.030 119.730 134.438

It considered in the budget draft to provide the required financing sources whether to cover the overall deficit

or repayment of due installment from the following financing sources:

(Million EGP)

2012/2013 2011/2012 Description

Budget Draft Budget Revised Budget

2010/2011

Actual

Issuance of bills and bonds 226.512 218.800 204.500 146.982

Borrowing from foreign sources 1.750 94 94 1.374

Borrowing from other sources 0 14.280 14.280 18.257

Net privatization proceed 250 250 250 22

Total financing sources 228.512 233.424 219.124 166.634

Naturally, if financing sources, other than bills and bonds, are available, such as loans from IMF, which are targeted to be 3.2 Billion USD. i.e. 19.2 Billion EGP, or other financing sources. Such sources shall replace the bills and bonds.

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Fifth: Position of Domestic and Foreign Public Debt:

The State’s General Budget deficit is certainly one of the main

reasons conducive to increase the volume of public debt. The submitted

2012/2013 draft General Budget includes an overall deficit of

approximately EGP 135.0 bn., which necessitates borrowing to cover

the deficit; leading to an increase in public debt.

Despite the great challenges facing our national economy,

particularly with the effects of the current events 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

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on national income, to minimize the burdens resulting from debt service

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:

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Table no. (35)

Development of Net Public Debt

(Million EGP)

Net public debt of budget's entities

% of Net Debt to GDP

FY Domestic

debt Foreign

Debt

% of

domestic debt

GDP % of

domestic debt

% Foreign

Debt

% Foreign

& Domestic

Debt Million Million Million Million % % %

2006-2007 478172 71575 549747 744800 64.2% 9.6% 73.8%

2007-2008 478699 145752 624451 895500 53.5% 16.3% 69.7%

2008-2009 562326 143145 705471 1042200 54.1% 13.7% 67.7%

2009-2010 663818 146717 810534 1206700 55.0% 12.2% 67.2%

2010-2011 808112 158734 966846 1371800 58.9% 11.6% 70.5%

2011-2012

Till

December 2011

894573 154871 1049444 1529947 58.4% 10.1% 68.5%

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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 decreased to reach to 70.5 % by the end of

FY2010/2011, of which 58.9 % as a domestic debt and 11.60 % as a

foreign debt. Then it kept on decreasing until it reached to 68.5% of

GDP in end of December 2011.

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 social 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, amounted by the end of June 2011- to about USD

26.2 bn. (equivalent to EGP 158.734 m.). Adding that to net domestic

public debt at the end of June 2011, net Domestic and Foreign Public

Debt became at the end of June 2011 approximately EGP 1219175 m.,

at 88.9 % of GDP, as this debt reached to 1.302.625 million EGP in end

of December 2011, represents 85.1% of G.D.P as shown in the

following table:

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Table no. (36)

Development of Net Domestic and Foreign Debt

(Million EGP)

Description Till 30.06.2011 Till 31.12.2011

Domestic Debt

Budget entities' debt 808.113 894.573

Economic authorities’ debt 66.818 66.529

NIB Debt 185.510 186.652

Total 1.060.441 1.147.754

Government Foreign Debt 158.734 154.871

Total 1.219.175 1.302.625

GDP 1.371.800 1.529.947

Percent of Domestic Public Debt to GDP 77.3% 75.0%

Percent of Government Foreign debt 11.6% 10.1%

Percent of Total Public Debt to GDP 88.9% 85.1%

-121-

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 this borrowing not exceeds 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.

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Chapter 6

The Public Treasury Budget Draft FY 2012/2013

---- Honorable/ President of the people assembly


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.

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(Million EGP)

Administrative bodyLocal

Administration

Services Authorities

Total

# Revenues - Tax 265.213 860 832 266.905 232.232 - Grants 8.602 0 419 9.021 9.974 - Other Revenues 96.074 5.023 16.453 117.549 107.441

Total Revenues 369.889 5.883 17.704 393.476 349.647# Expenditures - Wages and Compensation of Employees 55.402 65.753 15.472 136.627 110.497 - Purchase of Goods and Services 13.481 8.528 6.755 28.765 29.255 - Interest 133.259 214 138 133.612 100.800 - Subsidy, Grants and Social Benefits 140.447 356 5.034 145.838 154.454 - Other Expenditures 31.611 126 1.588 33.325 35.622 - Purchase of non-Financial Assets "Investments" 27.538 3.461 24.620 55.618 45.661

Total Expenditures 401.738 78.440 53.607 533.785 476.290Cash Deficit (Surplus) 31.849 72.557 35.902 140.309 126.643

# Net Acquisition of Financial Assets - Receipts from borrowing and sales of assets (without privatization) 13.138 0 0 13.138 10.719 - Acquisition of domestic and foreign financial assets (without treasury contribution in structure fund) 7.742 0 82 7.824 4.056Net Acquisition of Financial Assets -5.395 0 82 -5.314 -6.663

Overall Deficit (Surplus) 26.454 72.557 35.984 134.995 119.980# Financing Sources of Overall Deficit:Borrowing and Issuance of Domestic Securities

* Issuance of Securities other than Share to fund Budgets' Deficit 118.513 72.743 35.255 226.512 204.500. Borrowing from other Sources 0 0 0 0 14.280Total Borrowing & Issuance of Domestic Securities 118.513 72.743 35.255 226.512 218.780Borrowing and Issuance of Foreign Securities

. To Funding Investments 574 0 1.177 1.751 94To Funding budgets deficit 0 0 0 0 0Total Borrowing & Issuance of Foreign Securities 574 0 1.177 1.751 94

- Total Borrowing & Issuance of Securities other than shares 119.088 72.743 36.432 228.263 218.874 - Excluding domestic and foreign loans repayment 92.884 186 448 93.517 99.144Net Borrowing & Issuance of Securities other than shares 26.204 72.557 35.984 134.745 119.730 - Add Net privatization proceeds 250 0 0 250 250

Net financing sources of overall deficit 26.454 72.557 35.984 134.995 119.980

Revised 2011/2012Description

Budget Draft of FY. 2012/2013

Table No. (37)Public Treasury Budget

Overall Picture of State's General Budget

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Table No. (38)

Public Treasury Budget

General Outcomes of Stat's General Budget

(Million EGP)

Uses Resources Outcomes

Description

Budget draft

2012/2013

Revised Budget 2011/20

12

Description

Budget draft

2012/2013

Revised Budget 2011/20

12

Description

Budget draft

2012/2013

Revised Budget

2011/2012

Total expenditures 533.785 476.289 Total

revenues 393.476 349.646 Cash deficit 140.309 126.643

Acquisition of financial assets (without treasury contributions in structure fund)

7.824 4.056

Receipts from lending and asset sales (excluding privatization proceeds)

13.138 10.719

Net Acquisition of financial assets ‐5.314 ‐6663

Total expenditures and acquisition of financial assets

541.609 480.345

Total revenues and lending receipts

406.614 360.365 Overall deficit 134.995 119.980

Repayment of domestic and foreign loans

93.517 99.144 Borrowing 228.263 218.874 Net borrowing

134.745 119.730

Treasury contributions in structure fund

250 250 Privatization proceeds

500 500 Net

privatization

proceeds

250 ‐250

Total 635.376 579.739 Total 635.376 579.739 0 0

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Chapter 7 Orientations of the fiscal policy

At the medium term ----



The current stance requires a neoteric approach in tackling the

fiscal policies in a way to diminish the levels of the public debt, and

mobilize the public resources to encounter the increased obligatory

expenditures on the government, taking into account the importance of

rationalizing these expenditures to the reasonable levels that don’t

prejudice the basic needs of the citizens.

Also, it has become inevitable to accomplish fiscal and economic

stabilization for the country at the medium term, such stabilization

require the due diligence through introducing the necessary structural

reforms, on the top priority of these reforms, the rationalization of the

energy subsides, to be confined to the eligible groups of the lower

incomes – along with the urgent need to expand the tax base, and

reinforcing the institutional capacities of taxation to create balance

between the tax burden laid on clients - from one side – and avoiding

the negative impact on the economic activity from the other side.

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So, it is of relative significance to mention the fiscal measures that

must be enforced at the medium term as of the current fiscal year:

Highly prioritized measures within the medium term

1- The completion of the general sales tax reform matrix, finalizing

the first stage targeted for application during the upcoming fiscal

year for the purpose of reaching the full fledge of the value added

tax, these reforms include among which, the unification of the tax

rates, reviewing the registration threshold, rationalizing the

incentives, having them confined to those goods with social

dimensions, shrinking the number of items that are included in the

table ( production tax ) , simplifying the procedures and the

mechanisms of both tax discounting and refunding. Reducing fines

and having them conjoined with the tax procedures applied in the

income tax law as possible.

2- Activate the tax administration to insure countering the tax

evasion, this could be realized through, the activation of the law

articles that are criminalizing the reluctance of issuing invoices,

and building the institutional capacities for sizing the risks of

transfer pricing, and following up the payments of tax arrears.

3- Introducing some amendments on the income tax law NO,

91/2005, where the practices affirmed the importance of these

amendments, including the insertion of adjustments into some

articles to tune the law drafting and closing the legal deficiencies

that permit the tax evasion in some cases, in addition, the

expansion of the tax scope to be extended to the majority of the

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economic activities and their yields. It is worth mentioning that the

tax exemptions applied in the Egyptian tax system are not

representing effective factors for attracting the investments,

notably, the foreign investor is still subject to the tax payment in

his native country, despite of enjoying the tax exemption in Egypt,

this implicitly means that, any determined tax exemption in Egypt

could be viewed as a financial support for the treasury of another

country, and not for the benefit of the foreign investor.

4- Modernization of the customs law, taking into consideration,

rationalizing the customs exemptions, completing the customs

administration development projects, the inspection’s mechanisms

and lessening the evasion risks, along with the enforcement of the

cooperation among the different customs departments for

exchanging information and expertise.

5- Activation of the real estate law, to insure the achievement of more

equitability in the tax system, notably, there is a percentage of 25%

of the proceeds will be earmarked for servicing the localities, along

with additional percentage of 25% for developing the slums.

6- Developing the Treasury Single Account framework based on the

practices, and reconsidering the utilization of the special funds and

the special accounts in a way to serve the national economy more

effectively.

7- Finalizing the automation of the state’s payment and receipt

system including among which the wage, the practice that will

boost the efficiency of the cash flows management system and

reducing the costs of managing the state’s financial resources.

-128-

8- The expansion of the partnership programs with the private sectors

to finance the investment projects and rendering public services,

such expansion will provide additional financial spaces, and

economic capacities that permit the acceleration of executing

various projects in the fields of infrastructures, and public services

without affecting the stabilization of the financial indicators of the

budget deficit and the public debt.

9- Resuming the debt swap efforts with the friend countries to trade

off most of these debts with executing developmental projects,

among mechanisms that will provide more financial space for this

purpose.

10- clear the sophisticated financial cross debt transactions among

the various government sectors ( Public Treasury – economic

authorities – National Investment Bank – pension funds ), as well

as the enforcement of specific measures to raise both the

economic and the financial efficiency of the economic authorities

in particular, the petroleum, electricity, railways, radio &

television union and others.

11-Reforming the health insurance system, and working on increasing

the numbers of beneficiaries.

12- Giving the care for the redeployment training among a neoteric

system to encourage the middle and small industries and

developing the recruitment rates.

13- Resuming the efforts for the purpose of reforming the energy

subsidization system gradually through more effective

mechanisms in the area of pricing, controlling, and managing the

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assets of the petroleum sector. without a doubt, the agenda of the

of the energy subsidization, and the leakage of great portion of

these financial resources for illegible groups represent the main

aspect in reprioritization of the government disbursement in favor

of areas characterized with high social dimensions, for instance,

health, education, and providing the necessary public utilizations.

Also there is a social consensus on the necessity of tackling this

agenda, with the consideration of the existence of an effective

social safety net to protect the much vulnerable groups.

14- In synchronization with that, using part of the attained surpluses

from these programs to be recycled in a way to enable the increase

of provisions of health, education, and the other social dimension

programs, for instance, expanding the base of beneficiaries from

the umbrella of social solidarity pension, also increasing the

appropriations for the economy housing, and others.

The budget and the debt estimates during the next three years

The indicators are referring to the beginning of gradual

recovery, with restoring the security and the political situation from

one side, and applying structural measures that are sending

confidence signals once more for the stabilization of the Egyptian

economy, hence, encouraging domestic and foreign investments

equitably.

-130-

Based on that, the economic growth rates, are projected to hit

between 4% and 4.5% during 2012/2013 fiscal year, comparing with

2% approximately during the current year, once again, they will

continue to increase gradually to record 5.4% in 2013/2014 and up to

5.8% in 2014/2015, the rate that will be accompanied with the retreat

of the unemployment rates, where they will be in descending trends

during the later years.

Hence, the projected attainable deficit during 2012/2013 fiscal

year will amount to L.E 135 Billion ( 7.6% of GDP ) , that rate will

be descending during the following fiscal year to between 7% and

7.2% of the GDP, reaching 6% of the GDP in 2014/2015 fiscal year.

It is worth mentioning that, the completion of the structural reforms

will lead to a continuous retreat in the overall budget deficit to reach a

percentage of 3.8% in 2016/2017.

In connection to that, the retreat of the gross public debt stock

levels (domestic & foreign ) for the State’s General Budget bodies

( Central administration authorities, local administration authorities,

and public service authorities ) to reach 80.3% of the GDP in

2012/2013 fiscal year, and continuing in their descending trend to

record 77.3% of the GDP in 2014/2015 fiscal year, and down to 63%

of the GDP in 2016/2017 fiscal year, which means that, the growing

capabilities of the economy to serve the debt and fulfilling its

obligations without creating any impediments toward achieving the

developmental targets.

-131-

Table No. (39)

Estimates of State's General Budget Performance for

the coming three fiscal years (2012/2013 till 2014/2015)

(Million EGP)

Draft Projected Description

2012/2013 2013/2014 2014/2015

Public revenues 393.475 451.158 493.205

Growth rate 12.5% 14.7% 9.3%

Tax revenues 266.905 327.597 370.058

Grants 9.021 3.219 3.018

Other revenues 117.549 120.342 120.129

Public expenditures 533.784 600.216 636.514

Growth rate 12.1% 12.4% 6.0%

Wages & compensation of employees 136.627 148.801 161.205

Purchase of goods and services 28.765 33.564 38.596

Interest 133.612 150.853 155.085

Subsidy, grants and social benefits 145.838 171.709 178.311

Other Expenditures 33.325 37.651 41.064

Purchase of non‐financial assets (investments) 55.618 57.638 62.253

Net acquisition of financial assets ‐5.314 860 24

Overall deficit 134.995 149.919 143.334

Remarks: % to GDP

Overall deficit 7.6% 7.3% 6.0%

Cash deficit 7.9% 7.2% 6.0%

Primary deficit 0.1% 0.0% ‐0.5%

Overall public debt 80.3% 77.4% 73.3%

Domestic debt 70.7% 68.9% 65.8%

Foreign debt 9.6% 8.5% 7.5%

Rates of economic growth 4‐4.5% 5.4% 5.8%

Growth rates of per‐capita GDP (EGP) 14.0% 13.3% 13.2%

-132-

Chapter 8 The relations with the economic authorities

---- Honorable / president of the people assembly


The third article of the State’s General Budget law NO, 53/1973

stipulates that, the State’s General Budget comprises all the uses and the

sources of all the aspects of the state’s activity performed by the central

administration, local administration units, and the public authorities and

the financing funds.

Whereas, the State’s General Budget doesn’t include the budgets of

the public economic authorities and the financing funds with economic

features, that are being identified by the issuance of decrees by the

Prime minister, there are separate budgets are prepared for each of them

to be presented from the minister of finance to the cabinet, and then are

submitted to the people assembly for ratification, the relationship of

these separate budgets and the State’s General Budget are confined to

the surpluses transfers to the state, and the loans and the contributions

determined for these budgets.

Consequently, budget drafts of these economic authorities were sent to

your esteemed council for comments before ratification.

-133-

The important point in this concern, is the relationship between the

public treasury and the economic authorities in 2012/2013 budget draft

as following;

L.E Billion

Transfers to the public treasury 119.8 131.2 ( 11.4 )

from the economic authorities

Public treasury payments 121.6 129.5 ( 7.9 )

to the economic authorities

The net ( 1.8 ) 1.7 (3.5 )

So, the projected economic authorities transfers to the public treasury in 2012/2013 budget draft amount to L.E 119.8 Billion, the sum that is less than the transfers of the public treasury (L.E 121.6 Billion ) to these economic authorities of about L.E 1.8 Billion

-134-

Tab

le No. (40)

Total T

ransferred

Am

oun

ts from E

conom

ic Au

thorities

To S

tate's Gen

eral Bu

dget of F

Y 2012/2013

An

d V

ise -V

ersa

(T

hou

sand

EG

P)

Ch

ange

Ch

ange

Tran

sferred to state's

general b

ud

get D

raft 2012/2013

Bu

dget

2011/2012 +

-

Tran

sferred from

state's gen

eral b

ud

get

Draft

2012/2013 B

ud

get 2011/2012

+ -

From

econom

ic auth

orities

T

o econom

ic authorities

1- governm

ental su

rplu

s 47.529.871

56.639.770 0

9.109.899 1- S

ub

sidy (aid

s) 118.633.371

127.248.3500

8.614.979

2- Dom

estic tax 60.757.182

63.973.730 0

3.216.548 2- C

ontrib

ution

s 1.988.000

1.440.000 548.000

0

3- Royality (S

uez C

anal, E

GP

C)

4.808.907 4.846.250

0 37.343

3- R&

T u

nion

(services

perform

ed to state's

entities)

985.000 784.962

200.038 0

4- Dom

estic tax on p

revious

years

500 400

100 0

4- Nation

al post au

thority

(fees & com

mission

s)

50.000 70.000

0 20.000

5- Fees

5.525.491 4.610.320

915.171 0

6- Oth

ers 1.214.084

1.189.830 24.253

0

Total T

ransferred

to treasury

119.836.034 131.260.300

939.524 12.363.790

Total treasu

ry paid

121.656.371129.543.312

748.038 8.634.979

Net relation

(paid

amou

nts m

ore

than

transferred

amou

nts)

1.820.337 0

0 -1.820.337

Net relation

(transferred

amou

nts m

ore than

paid

amou

nts)

0 1.716.988

-1.716.988 0

Total

121.656.371 131.260.300

939.524 10.543.453

Total

121.656.371131.260.300

-968.950 8.634.979

-135-

Table No. (41)

Transferred Amounts from Economic Authorities to State's

General Budget Compared to budget draft of FY 2012/2013 and

(Million EGP)

Budget Draft Budget Description 2012/2013 2011/2012

Change

First: transferred from economic authorities to the state general budget 1‐ Government surplus from: Egyptian General Petroleum Corporation 25.986.000 37.770.000 ‐11.784.000 Suez Canal Authority 18.636.235 16.950.770 1.685.465 Other economic authorities 2.907.636 1.919.000 988.636 Total government surplus 47.529.871 56.639.770 ‐9.109.899 2‐ Income tax from: Egyptian General Petroleum Corporation 23.060.000 28.815.000 ‐5.755.000 EGPC (foreign partner) 22.756.000 21.771.000 985.000 SCA 14.095.323 12.805.480 1.289.843 Other economic authorities 845.859 582.250 263.609 Total domestic tax 60.757.182 63.973.730 ‐3.216.548 3‐ Royality from: EGPC 2.933.157 3.155.000 ‐221.843 SCA 1.875.750 1.691.250 184.500 Total royality 4.808.907 4.846.250 ‐37.343

4‐ Income tax for previous years 500 400 100 5‐ Fees Tax and goods fees 4.757.181 3.900.015 857.166 Harbor departure 3.310 8.305 ‐4.995 Departure fees according to law No. 53/1980 80.000 80.000 0 Crossing fees‐somid (EGPC) 300.000 236.000 64.000 In‐kind stamp fee (EGPC) 385.000 386.000 ‐1.000 Total fees 5.525.491 4.610.320 915.171 6‐ Other: Transferred from Al Awqaf authority to Al Wqaf ministry 619.000 563.000 56.000 Transferred from reconstruction projects authority to ministry of agriculture (controls) 13.000 6.000 7.000 Re‐lent interest transferred to treasury 78.023 90.950 ‐12.927 Re‐lent installments transferred to treasury 239.739 280.199 ‐40.460 Allocated from EGPC for roads and bridges 62.000 55.000 7.000 Allocated for presidential services sector 62.000 55.000 7.000 Aids for others (touristic governorates) 22.000 21.000 1.000 Costs of authorities' services 118.322 118.681 ‐360 Other Total 1.214.084 1.189.830 24.253

Total transferred amounts to the administrative body 119.836.034 131.260.300 ‐11.424.266

-136-

Table No. (42)

Amounts Allocated in State's General Budget (as aids)

To Economic Authorities Budget Draft of FY 2011/2012 and

(Thousand EGP)

Budget Draft Budget Description

2012/2013 2011/2012

Change

1‐ Subsidy (aids) to

EGPC 70.000.000 95.535.000 ‐25.535.00

GASC 26.600.000 18.884.000 7.716.000 National authority for social insurance – Social insurance fund for employees in governmental sector

11.900.000 6.204.000 5.696.000

National authority for social insurance – Social insurance fund for employees in public enterprises and private sector

7.530.000 3.500.000 4.030.000

Other economic authorities 2.603.371 3.125.350 ‐521.979

Total subsidy (aids) 118.633.371 127.248.350 ‐8.614.979

2‐ Contributions 1.988.000 1.440.000 548.000

3‐ R & T union (services performed to the government entities) 985.000 784.962 200.038

4‐ Post national authority Commission of collected and spending government

authorities account 40.000 55.500 ‐15.500

Release fees for armed forces correspondence

1.000 1.000 0

Commission of check balances 1.000 3.500 ‐2.500

Commission on sales and stamps 8.000 10.000 ‐2.000

Total of post national authority 50.000 70.000 ‐20.000

Total amounts allocated in state's general budget

(as aids) to economic authorities 121.656.371 129.543.312 ‐7.886.941

-137-

The conclusion



I was very keen during my aforementioned presentation of the State’s General Budget that was submitted to your tribute council, to affirm that the implementation of the fiscal policy is on the right track, moving in a balanced steps that give all considerations to the social aspects, as connected and continuous policy of our government, along with those advanced steps toward realizing the economic dimensions to achieve a sustainable development which pillared on the production, investment, paving a proper environment suitable for triggering our national economy.

Also, I was keen during the presentation of the State’s General Budget to rely on the transparency, honesty, realism, as focal points through which the government and people representatives are conversing, the matter that was obviously crystallized through:

The assessment of the budget uses in the context of an effective, rationalized spending without squandering or parsimony including the investment appropriations, considering the defining limits without breaking.

The assessment of the public resources in the frame of the tax capacity of the society, considering the state’s attitude toward executing an integrated matrix, taking into account the importance

-138-

of restructuring some aspects of the tax system to have it more effective in performance and realizing the tax justice.

Implementing a stringent financial policy through cash flow management of the public treasury using the scientific approach to control the public debt and mitigate its burden, in a frame balancing between the needed financing generated from non inflationary sources and the financial discipline required to reduce such debt and have it linked to the GDP.

The state’s rights and the ownership of its institutions must yield benefits, the management must be poured into the public treasury where achieving a proper return on the capital of those institutions considering the social role played by some of them.

I would like to refer to the importance of the everlasting and continuing coordination between both the fiscal and monetary policies pursuant to article NO, 15 of the State’s General Budget achieving the required discipline in the economic performance, and the stabilization of the exchange rate for the purpose of maintaining the purchase power of the Egyptian pound and healing the inflation and raising the level of exports and enhancing the trade balance , and increasing the growth rates in general.

I am fully sure that, the reform and the development attitudes will be more profound in a frame of the consultation and the conversing with your esteemed council and its ad hoc committees, which will help in achieving prosperity of our nation and achieving the welfare for our beloved Egypt.

May Allah provide success to our efforts

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