Cairo, Reuters—Egypt’s cabinet has submitted a revised budget for the new fiscal year which starts on Tuesday, proposing a narrower deficit after President Abdel-Fattah El-Sisi rejected a previous draft because spending was too high, Finance Ministry spokesman Ayman Alkaffas told Reuters on Sunday.
The new budget plans a deficit of 240 billion Egyptian pounds (33.6 billion US dollars) in the fiscal year ending June 2015, less than the 292 billion pounds (40.8 billion dollars) in the initial draft, he said.
Last month the Finance Ministry predicted a fiscal gap of around 290 billion pounds (40.6 billion dollars), or 12 percent of GDP for the coming year and forecast growth of around 3.2 percent, too low to create enough jobs for the young Egyptians that enter the workforce each year.
Boosted by aid worth billions of dollars from Gulf Arab countries after Sisi deposed Islamist president Mohamed Mursi last July, Egypt’s 2013/2014 budget deficit was set to shrink to around 11 percent of GDP from some 14 percent the year before.
It was not immediately clear what percentage of GDP the deficit would account for in the new budget.
“All non-productive expenses have been trimmed down,” Alkaffas said, but declined to go into details pointing to a statement due to be issued later on Sunday.
When asked about a timeframe or details of cuts in Egypt’s energy and food subsidies program, which traditionally eats up around a quarter of state spending, he said: “We don’t have a timeframe or a named product. This is going to be coordinated with other ministries.”
Sisi, who was inaugurated as president this month, has pledged to give up half his salary and property and called on the Egyptian people to make similar sacrifices, as he prepares the public for a period of painful economic austerity.
In the same speech, Sisi rejected the initial budget plan, saying the deficit was too large and continued borrowing would not leave “anything good” for future generations.
The turmoil of the past three years, in which two presidents have been overthrown and hundreds of people killed in the streets, has battered the tourism industry and investment, worsening a huge unemployment problem and pushing up the deficit.
A simple spreadsheet model of Egypt’s public debt, created by Reuters in March, suggests it will be several years before the rising ratio of debt to GDP, which was 89.2 percent in the fiscal year to June 2013, levels off and starts to fall.