Gulf vows to continue propping up Egyptian economy

On the occasion of former Field Marshal Abdel-Fattah al-Sisi’s election as president of Egypt, Saudi King Abdullah bin Abdul Aziz sent a congratulatory telegram, including a call to “all brothers and friends and this world” to organize a donor conference to assist Egypt in overcoming its economic crisis. 

Those who are able to donate but lag behind “will have no place among us tomorrow, if ever they are to meet such circumstances and seek our help,” the King warned.

The United Arab Emirates’ leadership was quick to back the call. Abu Dhabi’s Crown Prince Sheikh Mohamed bin Zayed al-Nahyan confirmed to state news agency WAM that the UAE leadership is keen to support the Saudi initiative, and will contribute to efforts that will enable Egypt to fulfil its ambitions for pride, dignity, growth and development. 

The statements should come as welcome news for Egypt’s fiscal guardians, as the latest monthly bulletin from the Ministry of Finance shows that, once again, Egypt’s financial health is highly dependent on donations from its allies in the Arab Gulf. 

According to the May 2014 Financial Monthly Bulletin, Egypt’s budget deficit declined to LE163.3 billion, or eight percent of GDP by the end of April. At the same time last year, the deficit was LE184.8 billion, or 10.5 percent of GDP.

Between July 2013 and April 2014, government revenues reached LE 314.8 billion, while expenditures were LE471.8 billion.

More than one sixth of all revenue in the period, some LE51.3 billion came in the form of support from foreign governments, mostly cash grants and deposits by donors to the Central Bank of Egypt. In the same period a year earlier, grants from foreign governments amounted to just LE4.56 billion.

Without these funds, the budget deficit would have exceeded LE208 billion, assuming no changes in expenditures.

In addition to grants, Egypt did record some positive growth in tax revenue, which rose to 195.1 billion, up from 177.6 billion in the same period last year.

Taxes on income, capital gains and profits accounted for most of the increase, showing 21 percent growth to reach LE90.4 billion. Growth in these sectors, along with taxes on property and international trade, was able to compensate for declining revenue from taxes on services and excises on domestic commodities.

While tax revenues rose by 9.9 percent, expenditures increased by 11.5 percent.

The largest increase came in compensation of government employees, which rose by LE26.2 billion to reach LE128 billion. Other notable increases include subsidies to the electricity sector, which skyrocketed from LE1 billion to LE11 billion, pension payments which doubled to reach LE26.8 billion, and social insurance pensions, which rose 28 percent to reach LE4.1 billion.

Going forward, the report says, the government plans to lower the budget deficit, achieve social justice, re-prioritize public spending to protect Egypt’s most vulnerable citizens, and allocate funds to improve public services and social programs. With such lofty goals, the promise of continued support from the Arab Gulf is surely welcome news.


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