Egypt’s Payroll Is Fine, but Its Revenues Are Too Low

Source: The Tahrir Institute For Middle East Policy
Author(s): Osama Diab

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Throughout June, the Egyptian cabinet and parliament debated a budget for the 2017–18 fiscal year, which began on July 1. The budget has been referred to in Egypt as the “IMF budget” due to the number of restrictions in an austerity program imposed by the International Monetary Fund. The IMF—which approved a $12 billion package of loans in November 2016, in exchange for a number of reforms—aims to reduce Egypt’s public spending from around 30 percent of its gross domestic product to below 23 percent by 2021, with one-sixth of those cuts coming from the public payroll. In the final budgetapproved by Egypt’s House of Representatives on July 4, the wages of government workers rose nominally, from nearly 229 billion Egyptian pounds (LE) to LE 239.5 billion—but this 4.7 percent increase was dwarfed by inflation of over 30 percent. What are the effects of this real reduction in government wages? Should the government make cutting this portion of public expenditures a priority?…

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