While many people generally agree that governments faced with deficits must cut spending, most do not like cuts in specific programmes. It's the same everywhere (...).
Egyptians generally agree that there must be cuts to balance the budget, but it is difficult to convince the public that wages take up a huge chunk of government spending, and that spending on some welfare programmes, like the energy subsidy system need to be drastically reined in.
Dcode, a consultancy that specialises in “Dcoding” the Egyptian economy, explains that the reason the budget deficit widened during July and December of the current fiscal year to stand at LE91.5 billion (5.3% of GDP), up from LE74 billion a year earlier (4.8% of GDP) is a simple financing problem: Revenues grew at a faster rate than expenditure.
Even though government revenues from taxes grew, it was not enough to make up for the “debt service payments, higher subsidies and wages to accommodate popular demands and high international commodity prices.”
This is where a seasoned politician usually comes in to explain to the public that this is unsustainable and that spending on public sector wages (26 percent of the state budget is currently spent on paying the wages of almost one third of the total labour force) and energy subsidies (20 percent of government spending) must slow down. This can be done by actually going ahead with energy subsidy reforms, and redirecting funding to the private sector where jobs are more lucrative and dynamic and the government does not have to support millions of wages.
But, as we have come to realise, there are no experienced politicians in Egypt, just airheads who bump heads rather than engage in a real dialogue.
Why not take time to compile a diagram that shows the real impact of tax increases, subsidy reform and public sector cuts on Egypt’s neediest? If correctly enforced (and that’s a big If), Egypt’s struggling households will find restructuring the budget will by and large give them better access to bread and fuel (at cheaper rates than today), and will exempt them from paying taxes. (rebeleconomy)
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