The government’s plan reduce spending to offset the budget deficit is unfeasible, conventional and bureaucratic, experts have said. The plan was announced on Sunday.
They explained that any such plan should review interest rates, subsidies and social grants.
Last week, Finance Minister Mumtaz al-Saeed said that Egypt is trying to maintain its budget deficit at 134 billion Egyptian pounds, or 8.6 percent of gross domestic product, in the financial year ending in June.
The new plan announced Sunday will cut expenditures in this fiscal year’s budget by reducing bonuses for administrative employees by 10 percent and by lowering spending on goods and services to 3 percent. The aim is to reduce spending by LE20 billion to LE24 billion, and the deficit from LE134 billion to LE110 billion.
“They should force all ministries and government bodies to report their private funds to the finance ministry,” suggested Amir Rizq, the former Finance Ministry’s chief accountant.
Economic expert Hassan Ouda suggested that the government should reduce wages and subsidies for commodities.
Egypt negotiated a US$3.2 billion facility with the IMF earlier this year, only to turn it down in the summer. Since then it has sent conflicting messages about whether Egypt still wants the funds, even as the economy falters.
Foreign reserves plunged from $36 billion at the end of 2010 to about $20 billion at the end of November in the wake of the uprising that unseated Mubarak in February and the subsequent political turmoil that scared away investors and tourists from the country.