Amid the crisis in Egypt, citizens are trying to check on economic conditions by following the media and social media platforms, but their confusion increases during this follow-up due to conflicting economic data, especially when talking about the state of the government budget.

For example, Finance Minister Mohamed Maait repeats in his statements to the media and in parliament that the budget achieves a surplus, while experts say that it achieves a deficit, and even a chronic and growing deficit that they do not expect to be remedied in the coming years.

To understand this problem, let us agree that a budget is "estimates of resources and expenditures over a future period, usually a year," and this definition applies to every estimate of expenditure, whether for a state, a small shop, a bank, or a small household. When the resources of that entity exceed its expenditures, there is a surplus in the budget, and when the expenditure exceeds the resources, the budget achieves a deficit.

I expect the reader to say: if it's that simple, then why so much so different descriptions?

There are several types of budget deficit, including cash deficits, total deficits, and primary deficits, and the indicators of each of these types are not identical, and their random use may lead to the non-specialist being confused and uncertain about the data that may push him to refrain from following them.

8 expenditure sections and 5 resources

To illustrate this, we use the Egyptian government budget figures (ministries, service agencies, and governorates) for the new fiscal year 2023-2024, which will take effect at the beginning of next month and continue until the end of next June.

The budget law indicates that it is divided into two parts: expenditure and includes 8 chapters, and resources consists of 5 chapters, and the total of the two parts must be equal in the end, and the budget for the next fiscal year indicates that the total of each of them is expected to reach 4349 billion pounds.

The eight expenditure sections are:

  • Wages of government employees: 470 billion pounds.
  • Purchase of goods and services for government departments: EGP 139 billion.
  • Interest on internal and external government debt: EGP 1120 billion.
  • Subsidizing goods, grants and social benefits: EGP 530 billion.
  • Other expenses of the army and subscriptions to international bodies: 145 billion pounds.
  • Government investments in infrastructure and services: EGP 587 billion.
  • Acquisition of assets with shares in public bodies and companies: EGP 42 billion.
  • Internal and external loan installments: EGP 1316 billion.

    • The five resource sections are:

  • Taxes of all kinds: 1530 billion pounds.
  • Grants: EGP 2 billion.
  • Other revenues from surpluses of government agencies and companies: EGP 610 billion.
  • Proceeds from government lending and asset sales: EGP 69 billion.
  • New borrowing during the fiscal year: EGP 2140 billion.

    • The difference between types of disability

    Looking at the budget allows easily identifying the amount of the deficit in the new budget, which the government included in Chapter V of resources under the name of borrowing with a value of 2140 billion pounds, and the financial statement of the budget revealed the sources of this borrowing; by 2038 billion pounds from inside the country, and 102 billion pounds from abroad, and even if the financial statement did not disclose the size of this deficit, the calculation of the difference between the eight expenditure sections of 4349 billion pounds, and between the first four resource sections that The amount of 2209 billion pounds, will give us the same deficit figure that will be borrowed, which is stipulated in Chapter V in resources.

    Despite this clarity, the statements of officials in the Ministry of Finance and the Planning and Budget Committee in Parliament surprise you with lower numbers, by using these precise technical terms for the different types of deficits, to suggest the success of their efforts in reducing the budget deficit, and the following is an explanation of the difference between these types:

    • Cash deficit: It refers to the difference between the first six sections of expenditure (the total of which is called expenditures), which is 2991 billion pounds, and the first three sections of resources (whose total is called revenues), which is 2142 billion pounds, and the cash deficit is therefore 849 billion pounds.
    • Total deficit: It refers to the value of the aforementioned cash deficit, in addition to the difference between the value of the seventh chapter of spending (42 billion pounds) and the fourth chapter of resources (69 billion pounds), and here the figure diminishes by 25 billion pounds, bringing the total deficit to 824 billion pounds.
    • Primary deficit: In which the value of interest (1120 billion pounds) is subtracted from the value of the total deficit (824 billion pounds), to reach the figure of 296 billion pounds classified by the Minister of Finance in the category of surplus instead of the deficit box.

    In this way, the deficit of 2140 billion pounds turns into a primary surplus of 2.5% of GDP that the minister boasts from time to time, a percentage that he reaches by dividing 296 billion pounds by the value of GDP expected during the new fiscal year (11 trillion and 841 billion pounds), and because the majority of Egyptians do not know the difference between the types of deficit, many believe that the budget achieves a surplus.

    The promoters of this selective and optimistic reading of budget data base the International Monetary Fund's publication of "primary deficit" data in the world's countries in its semi-annual fiscal monitoring report, ignoring the fact that the Fund publishes tables of all other types of deficits.

    There are several types of budget deficits, and the indicators of each are not identical, and their random use can lead to confusion among the non-specialist.

    Noteworthy standard

    In fact, the criterion worth considering is the size of the real budget gap that causes public debt to increase continuously, prompting fiscal decision-makers to pass more taxes and fees, reduce subsidies, and increase derivatives prices to reduce the difference between spending and resources.

    It only takes some discernment, some commoners say, and they argue that "without the need for data, if there is a budget surplus, why is there a development fee imposed on so many goods recently? And why was new stamp tax brackets imposed on cinemas, amusement parks and entertainment? Why raise the income tax cap to 27.5% instead of 25% previously?!"

    The Minister of Finance, for example, confirmed that the ratio of the total deficit to GDP will reach 7% during the next fiscal year, which remains high by international standards even assuming its correctness; the European Union, for example, requires that the budget deficit in its countries should not exceed 3%, and many expect that the current turmoil of the exchange rate, the possible hike in bank interest, and asylum To more internal and external borrowing, in increasing the burden on the budget and the higher percentage of the total deficit than expected by officials, which happened in the current fiscal year, in which the actual total deficit ratio increased than expected when its budget was approved.