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Al-Ahram Weekly 29 Apr. - 5 May 1999 Issue No. 427 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly 29 Apr. - 5 May 1999 Issue No. 427
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| Published in Cairo by AL-AHRAM established in 1875 |
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Egypt Region International Economy Opinion Culture Profile Focus Special Travel Sports People Features Living Time Out Chronicles Cartoons Letters Ganzouri goes Gidden's way
by Gamal Essam El-DinThe government submitted this week to the People's Assembly a new budget that claims to reflect a commitment to protecting the poor and limited-income classes from the ravages of transition to a full market economy. Minister of State for Planning Zafer El-Bishri, addressing the People's Assembly last week, said that the 1999/2000 budget will increase public spending to LE99.4 billion, compared to LE91.5 billion last year. Estimated revenues, El-Bishri added, will stand at LE90.6 billion.
According to El-Bishri, the most significant characteristic of the new budget is that it emphasises the government's determination to deal with social hardships arising from economic reform policies. In this respect, El-Bishri indicated that budgetary allocations for "the social dimension" will assume as much as LE38.4 billion (38.6 per cent) of the total, compared with LE34.5 billion in the 1998/99 budget.
The emphasis on the social dimension in the new budget was stressed two weeks ago by Prime Minister Kamal El-Ganzouri, especially after leftist MPs accused the government of "working for the rich and ignoring the poor".
According to El-Ganzouri, since Egypt switched to a market economy in 1991, the government has been very keen not to leave the nation's vast majority of poor unprotected. "In 1991, the poorest classes accounted for 10.9 per cent of the total population. This figure fell to 7.4 per cent at present. The percentage of poor and limited-income classes fell from 25 per cent to 22.8 per cent. Would someone please tell me which of the countries involved in economic reforms managed to achieve this drop?" El-Ganzouri said.
El-Ganzouri also emphasised that the government is not working for the rich. "We refrained over four years from imposing any new taxes or fees. Is this a policy that works for the rich? I want to assure you that social justice is the cornerstone of government in Egypt," El-Ganzouri said.
As a basic part of its social commitments, El-Ganzouri explained that the government has decided to increase the volume of employees' salaries from LE22 billion at present to LE25.3 billion in the new budget. "In this respect, it is alleged that we are planning to dismiss four million employees while we are, in fact, appointing 150,000 each year," said El-Ganzouri.
Economic analysts at the Shura Council, which began debating the budget this week, argued that the annual increase of 10 per cent in employees' salaries should come to an end this year. "It was acceptable to raise salaries by such a percentage each year when the inflation rate was too high. Now with the inflation rate down to four per cent, it will not be recommended to continue with this policy," said a new Shura Council report.
Ahmed Rashad Moussa, chairman of the Shura Council's Economic and Financial Affairs Committee, said that the new budget clearly defines the state's new role in a market economy. "It is a role similar to Tony Blair's 'Third Way' policies in England. The state here is more than a guardian state and less than a monopolistic state," Rashad said. In other words, he added that the state here increasingly avoids intervening in economic activities. At the same time, Rashad argued, the state is quite ready to intervene to save certain social classes from the hardships of economic reform and the new liberalisation policies.
Rashad pointed out that the government has shouldered great financial burdens this year in order to protect different social classes. He cited the government's decision to bear one-third of the cost of pesticides for the cotton crop in the new season and half of the value of the seeds. "Besides, we were keen to raise the value of agricultural loans from LE2 billion to LE2.7 billion for summer crops and from LE1 billion to LE1.3 billion for winter crops in this budget," said Rashad.
The budget, however, faced some criticism from Shura Council member Heba Handoussa. A well-known economist and director of the Economic Research Forum, Handoussa charged the government with allocating big budgetary amounts to residents of Cairo and Alexandria. "The residents of these two metropolitan cities receive over half of the budgetary spending on drinking water and electricity while most residents of other governorates, especially in Upper Egypt, complain of deterioration in basic social services," Handoussa said.
El-Bishri said that the budget earmarks LE16.1 billion for education. "This clearly reflects the government's social obligations in this field. Spending on education is investing for the future," he said. He added that the budget allocates LE5.4 billion for food subsidies and low-cost housing.
In the meantime, the Shura Council and the different committees of the People's Assembly this week heatedly debated the government's new socio-economic plan. According to Rashad, while the budget incorporates the government's social commitments and "Third Way" policies, the plan emphasises its market economy and privatisation policies supported by the IMF and the World Bank. "The plan earmarks LE48.7 billion -- out of a total of LE71.2 billion -- for private investments, compared with LE43 billion in the 1998/99 budget. By contrast, the public sector will receive as little as LE4.1 billion, down from LE5.5 billion in the outgoing budget. This means that the private sector's contribution to GDP will be increased to 74.7 per cent, slightly up from 74 per cent at present," Rashad said.
El-Bishri said that the plan is generally aimed at raising the value of the Gross Domestic Product (GDP) from the current LE286.4 billion to LE286.6 billion, and reaching a national growth rate ranging from 6.8 per cent at present to 7.6 per cent next year.
To secure the above objectives, El-Bishri explained that the plan sets aside LE9.9 billion to implement a number of mega-development projects aimed at distributing the population over 25 per cent of Egypt's land area over the next twenty years compared to inhabiting only 5 per cent of the land now. "The plan allocates LE9.9 billion -- out of 11.9 billion allocated to infrastructure -- to giant projects in Toshka, the Gulf of Suez, East of Port Said, North Sinai and Aswan. In addition, the government expects the plan to generate an additional half a million jobs this year, reduce the inflation rate to 3.6 per cent, and keep the budget deficit at one per cent," El-Bishri said. Upper Egypt, an area plagued by excessive poverty, will receive the lion's share of investments, 30 per cent in the new budget compared with 16 per cent allotted to Greater Cairo, the minister emphasised.
