14 - 20 November 2002 Issue No. 612 Economy	Current issue Previous issue Site map
Published in Cairo by AL-AHRAM established in 1875		Recommend this page

The deficit: no problem

MINISTER of Finance Medhat Hassanein told Al-Ahram daily newspaper that Egypt's budget deficit, which is equivalent to 5.8 per cent of GDP was not a cause for concern.

"We should worry about a deficit only if it results in inflationary pressures that negatively affect the purchasing power of the currency and result in a decline in real income. This means that our deficit is still in the acceptable range as it is not accompanied by a major increase in prices," he said.

Egypt's official inflation rate is two per cent. Public expenditures have recently increased by 10-12 per cent annually, compared to a mere four-five per cent increase on the revenue side.

"We can hardly increase our revenues: 60 per cent of these come from taxes, sales tax and customs. Also the revenue side is difficult to change with the bulk of it cornered by salaries and wages of state employees and different kinds of subsidies," he said.

Hassanein said that one of the solutions to tighten the gap is a new plan that would link budgetary allocations to the efficiency of services.

According to this technique, a school whose students score highly in examinations will be provided with more money from the state budget than one whose students perform poorly.

"We have not started implementing it [the system], but we have experts from the World Bank who are currently training managers in various ministries," said Hassanein.

The finance minister said some ministries are already implementing the system. "In the Ministry of Finance we are currently setting up a number of performance criteria to measure the efficiency of the services provided by affiliated authorities," he said. "We have been working on this for 16 months, but we still need six or seven more."

"Besides reducing expenditures, [the system] will have a positive impact over the long run with people being more willing to pay their taxes as they will know that in return they are receiving services of better quality," he added.

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