The budget of any state is generally defined as an approved detailed estimate of public revenue alongside public expenditure for a given fiscal year. This usually covers what is needed to achieve specific goals within the framework of the planned economic and social development of the state based on its general policy.
One of the basic principles of a budget is “unity”, with all public revenue and expenditure recorded in one document. While this is the norm, there are exceptions, with budgets attached to some government departments or public bodies that are given administrative and financial independence. However, such exceptions aside, during Abdel Fattah Al-Sisi’s presidency in Egypt, we find that there are several funds operating in parallel with the state budget, which has opened the way for corruption and a lack of accountability and transparency from a government with absolute control over everything.
Egypt continues to suffer from essentially private funds which take money from Egyptian citizens and distribute it without supervision or accountability. When Sisi came along he leaned towards this way of extracting money from the public by creating parallel budgets that are not related to the state budget, even though their resources are essentially state money.
At the forefront of this process is the Viva Egypt Fund, which was initiated by Sisi on 24 June, 2014. He donated half of his salary to the fund as a PR stunt. Presidential order 139 of 2014 was issued decreeing its formation, then a new regulation, known as Law 84 of 2015, was issued regarding its establishment which revealed Sisi’s authoritarianism as he acted as if it was his personal fund. Article 2 of Law 84 of 2015 replaced order 139 and stipulated, “The president of the republic will decree the method of supervising, managing and administering financial and administrative affairs of the fund, in accordance with the nature and activity of the fund to enable it to carry out its mission without restriction by the governmental regulations referenced in any other law.”
Article 8 of Presidential order 139 of 2014 had stipulated that the resources of the Viva Egypt Fund are public funds subject to the provisions of the Penal Code, to be reviewed and audited by the Central Auditing Agency (CAA), with a quarterly report to be presented to the president. However, it was amended and replaced by Article 9 of Law 84 of 2015, which stipulated that annual and quarterly reports are prepared based on the standards of the CAA and reviewed by an accounting office selected by the fund’s board of trustees. The report is then submitted to the board of trustees who in turn present it to the president. The CAA prepares a performance indicators report annually, in the light of the financial statements approved by the auditor, and it is presented to the board of trustees, thus reducing the supervisory role of the Agency.
While the Viva Egypt Fund announced that it would work in health care, social support, urban development, economic empowerment, education and training support, and would be there in the event of disasters and crises — and these are noble areas of operation — the responsibility for them should fall on the state and be a part of its general budget. There is no need for a separate fund and flashy behaviour which opens the doors to underhand payments to businessmen and scaring investors away with the lack of transparency and integrity. The only key to the Viva Egypt Fund is in Sisi’s hands. Moreover, national economies are not usually based on the government begging for donations.
The biggest disaster is that Sisi is directing these often involuntary “donations” that he imposed on those guilty of construction violations to the Viva Egypt Fund. They are supposed to contribute towards the efforts to prevent the spread of Covid-19, and a draft law now stipulates a 1 per cent compulsory deduction from the net income of employees in the state and private sectors, except those on the very lowest of salaries. The Minister of Finance himself said that nothing from these employee deductions will go into the state treasury. Estimated at billions, the money is going to the Viva Egypt Fund instead, about which I have serious reservations.
The Viva Egypt Fund is not alone; Law No. 177 of 2018 created the Egypt Fund for the country’s sovereign wealth, with capital of 12.5 billion Egyptian pounds. The law gives Sisi the absolute right to transfer ownership of any of the “untapped” assets owned by the state, the fund or any of the other funds that he establishes, and gives him absolute powers to sell Egypt’s assets without any accountability. This is done by protecting the contracts made by the funds against legal appeals or from being contested by third parties.
Finance Minister Mohamed Maait recently announced a $125 million fund to ensure consumer financing and stimulate domestic consumption. According to him, the new fund will provide a guarantee for the authorities and companies that carry out consumer finance operations. This will motivate industrial, service, real estate and consumer finance companies to meet consumer needs for credit facilities and instalment plans. The fund will include several more specialised branches that will be paid for out of the public treasury. He did not specify the sectors in which these branches will be active. The minister added that the new fund would also provide low-cost financing for government initiatives, such as the project to convert cars to work on natural gas.
This fund achieves Sisi’s vision of not only shackling the state with debt to the tune of almost $376 billion, but also shackling the Egyptian people with personal debt and opening the way for promoting the products of businesses owned and operated by the armed forces, which basically control the economy in Egypt. He is also creating a market for Israeli gas by limiting the licensing of cars to those that can run on natural gas.
The running of the Egyptian government by these sort of funds will continue as long as absolute rule is the norm, and supervision, accountability, transparency and integrity are regarded as crimes. Egypt does not lack resources as much as it suffers from them being looted by the people who are supposed to be their guardians.
This article first appeared in Arabic in Arabi21 on 15 July 2020
The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Middle East Monitor.