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Economists Against the Coup estimate Egypt's deficit could reach 300 billion

A translated version of the movement’s report is below:

What if the military coup continues?

Egypt’s budget deficit is expected to rise during 2013/2014 to between 290 and 300 billion pounds or 15.3 per cent. Government public debt (internal and external) will rise to 1.86 trillion pounds or 94 per cent. The external public debt will rise to 60 billion dollars or 22 per cent


General SisiA translated version of the movement’s report is below:

What if the military coup continues?

Egypt’s budget deficit is expected to rise during 2013/2014 to between 290 and 300 billion pounds or 15.3 per cent.

Government public debt (internal and external) will rise to 1.86 trillion pounds or 94 per cent.

The external public debt will rise to 60 billion dollars or 22 per cent

Economic Analysis:

Former Prime Minister Dr Hesham Qandil and his government submitted a budget draft for 2013/2014 before the Shura Council, which the Council then adopted on 28 June 2013. According to the draft, the budget deficit would reach 186 billion pounds or 9.1 per cent by the end of June 2014. The fiscal year’s projected deficit was based on a set of reforms:

  1. a. Expenditure Remedial Measures: Reform measures to support petroleum products by applying a smart cards system and streamlining commodities support (fight smuggling, control money exchange and reconsider social benefits subsidies). This would save 60 billion pounds.
  2. b. Revenues Remedial Measures: Reform tax system including the sales tax, fight distortions of sales taxes rates, reform income tax laws that were adopted by the Shura Council before the budget and the customs taxes, issue mines and quarries act and a fourth license to mobile and internet. These revenues were estimated to provide 36 billion pounds.

The government was planning to apply the reforms by July 2013 or latest by September 2013. However, on 3 July the military coup disrupted the government’s plans. Therefore we must ask, what is the impact of the military coup on the budget deficit?

The budget deficit could rise to 15.3 per cent by the end of the fiscal year, while the public debt could rise to 94 per cent while taking into account Egypt’s access to grants and subsidies of more than 40 billion pounds, including $5 billion from the Gulf States, for several reasons:

  1. a. A regime that seized power by force cannot apply a reform program that might upset certain social strata, which could increase the burden on the budget by almost 100 billion pounds.
  2. b. Lower rates of economic growth as a result of political instability will negatively impact tax revenues as many companies are now bankrupt and foreign investments are leaving the country. This could cost the budget an estimated loss of almost 50 billion pounds.
  3. c. The foreign currency exchange rate against the Egyptian pound will rise 15 per cent at the very least by June 2014, which will increase the burden on the budget, mainly supporting petroleum products and imported food commodities.

If a military backed government continues in power the regime has two solutions:

  1. a. Request an additional $10 billion from Gulf States, which might prove difficult, and this would also increase the external debt to $60 billion for the first time in Egypt’s history.
  2. b. The Ministry of Finance could borrow 260 billion pounds from the central bank, which would create inflation and a rise in prices.

In short, if the military coup continues, Egypt faces an economic catastrophe that the young generations will ultimately have to pay for.

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