Egyptian new budget: Increase in army and judiciary budget by 28% and reduced subsidy for medicine and children milk by 55%

The financial report about this year’s general budget, which has been endorsed by Abd Al-Fattah Al-Sisi, reveals drastic changes in the subsidies and social welfare aimed principally at the poor and those with low income. The budget includes reducing subsidies on medicines and baby milk from 655 million pounds to 300 million pounds, reducing the subsidies allocated to Upper Egypt from 600 million pounds to 200 million pounds, and reducing the subsidies on low income families housing from 300 million pounds in the previous budget to 150 million pounds only in the current budget. Subsidies for comprehensive health insurance was also reduced from 1.5 billion pounds to zero. Subsidies for students subscriptions were also reduced from 250 million to 200 million pounds. In contrast, Al-Sisi approved increasing the budgets of the army, the judiciary and the constitutional court to 49 billion pounds, an increase of about 11 billion pounds compared to last year’s budget. He also approved doubling the budget of the military industry to 2 billion pounds up one billion pounds from last year’s budget.

Major changes, described by observers as drastic, have been revealed in the financial report about the state’s general budget for the current year, which was endorsed by the president of the republic. The new budget consists of a gross expenditure of about 800 billion pounds and a gross revenue of about 550 billion pounds. This means that the deficit in the budget amount to about 250 billion pounds. The report described the increase in salaries over the past three years as an extremely dangerous thing and approved a number of measures to counter that increase including: cancelling the tax relief on pay rises allocated to civil servants and ending the practice of adding it to the basic salary. This will lead to reducing the salaries of civil servants over the next five years. The report also approved stopping appointments to the civil service bureau and linking them to the ratio of those who are referred to retirement.

The budget included a number of new additional items, including:

• increasing the budgets of the army and the judicial institutions by 28 % to 49 billion pounds. This item was numbered as item number one in the budget;
• tippling the government’s post and telecommunications expenditure from around 350 million pounds to 900 million pounds;
• doubling the subsidies allocated to the military industry from one billion pounds in the past budget to 2 billion pounds in the current one.

In contrast, the budget included reductions in a number of items, the most serious of which is the following:

• the reduction of subsidies for medicines and baby milk by more than 50 %;
• reducing the subsidies intended for the development of Upper Egypt by two thirds to 200 million instead of 600 million pounds;
• reducing the subsidies on low income families housing from 300 million pounds in the previous budget to 150 million pounds only in the current budget;
• reducing the subsidies for industrial zones from 3 billion to 400 million pounds only.

The cabinet had earlier decided to reduce subsidies for energy so as to reduce the deficit in the general budget to 10 % of the GDP. This led to a rise in the fuel prices and to a crisis whose ramifications are still unfolding.