Egypt set to reduce budget deficit in 2011-2012

CAIRO: Egypt's ruling military council on Monday approved the government's revised draft annual budget, which is set to post less of a deficit than originally forecast.

The draft budget for the year from July 2011 to June 2012 was endorsed by Field Marshal Hussein Tantawi, head of the Supreme Council of the Armed Forces, the finance ministry announced in a statement.

The government had to amend its original draft after submitting plans to run a budget deficit amounting to 11 percent of GDP, because of a sharp rise in public spending.

The new draft projects a deficit to 8.6 percent or 141 billion Egyptian pounds ($23.7 billion, 16.3 billion euros) by reducing state expenditure to 490.6 billion Egyptian pounds, with revenues estimated at 349.6 billion Egyptian pounds.

The drop in state spending follows Cairo's June 25 announcement that it would not draw on a three-billion-dollar loan facility it secured with the International Monetary Fund, nor would it take up a World Bank offer of aid.

The revolt that ousted president Hosni Mubarak after three decades in power on February 11 led to a sharp economic slowdown after years of annual growth of between five and seven percent.

The uprising left the economy battered and the lucrative tourism sector struggling to recover.

Cairo's decision to decline international financing reflects a desire to preserve Egypt's economic independence and its preference for Arab capital, as well as the transitional authority's reticence to make long-term decisions on debt.

Ratna Sahay, the IMF's deputy director for the Middle East, said on June 30 the IMF's assistance would have helped the government increase wages for the lowest-paid government workers and expand job-creating programmes.

"It would have supported plans to increase investment in the education, health, and low-income housing, which would in turn have helped the Egyptian economy to recover faster," she said. (AFP)