The Arabist

The Arabist

By Issandr El Amrani and friends.

A fuelish budget

The government on Tuesday gave first hints on its budget figures for the coming financial year 2006. The deficit amounts to LE57.6billions which is almost 10% of GDP. The release has been delayed for several weeks, probably as the government was divided over the future of different subsidies, but also wanted to wait and see how last year’s tax cuts would affect its tax income.

Yesterday, Finance Minister Bouthros Ghali said that the number of tax payers increased by 100% thanks to a national awareness campaign, bringing the percentage of people paying taxes to over 40%, up from previously as little as 20%.
“The point of this new law is to say what you want; whatever you claim you make, we will believe you, no questions asked, but you will be held responsible and accountable for your claims,� says the minister.

He gives an example of one citizen, a prominent doctor, who, based on his paperwork, claimed to make LE 20 a year.

“Of course we don’t believe that, it makes no sense. But we did not question him,� he says.

The Ministry in a first step has increased its basis of tax payers and will make them actually pay in the years to come.

That is the good news for the budget, but then the oil price comes in. Because of high oil prices which almost reached $70 per barrel these days the Ministries of Finance and Petroleum were forced to ask parliament to approve subsidies on oil products of LE40billions for the budget, earlier calculations envisioned LE29billions. For the first time, the subsidies are part of the general budget and not under the budget the Egyptian Petroleum Corporation, a move to make the amount of subsidies spent in this area more visible to the public. As a comparison: the government spends only LE30billions on health and education.

There was a lot of talk recently in the papers on the government intending to reform its system of subsidies. Recent Ministers’ statements suggest that electricity, fuel and gas prices will be increased, where as the government does not appear to be ready to cut food subsidies as well, except for better targeting those who are in dire need.