Refuting claims that were published by several media outlets, Minister of Finance Hany Demian said the government has not yet fixed estimates for the exchange value of the dollar and the price of several key commodities in the budget for the fiscal year (FY) 2016/ 2017.
“We have a conceptual framework and average for all commodity prices, taking into account international trade activities that forecast Suez Canal revenue, as well as activity of oil markets,” Demian told Daily News Egypt on Sunday at the Africa 2016 conference in Sharm El-Sheikh.
Media outlets claimed to have come into possession of leaked documents that purportedly showed the Ministry of Finance had placed an initial estimate for the exchange value of the US dollar at EGP 8.25. Other key commodities include the price of oil and grain.
While trying to stem panic that resulted from the purportedly leaked documents, the minister also noted the current situation presents several problems. “We are facing a large budget deficit and inflation is expanding and the economy did not grow as fast as we had hoped,” Demian said. This necessitates the re-prioritisation of public expenditure towards development.
Demian also addressed a piece of legislation that will amend the use of financial instruments.
“The financial instruments law, as a mechanism to diversify the sources of financing of the economy and the budget deficit, is currently being amended to prohibit the instrument holder from using state assets. However, the public treasury funds will stand as guarantor between the borrower (the State) and the lender,” Damian said.
Critics of the law, which was passed during the rule of former president Mohamed Morsi, claimed it makes government assets susceptible to the influence of bondholders, to the extent that they could eventually own these assets.
Damian said the ministry is currently working on the development of the law in cooperation with the Islamic Development Bank in technical affairs. The legislation in its final form and will soon be presented to the sheikh of Al-Azhar and the committee specialising in Islamic affairs for review before it is submitted to the parliament.
Damian said there is no timeline for the final presentation of the amendments to parliament, despite it seeming imminent.
While remaining cautious due to the paucity of economic growth in the international market and China specifically, Damian told Daily News Egypt that Egypt hopes to return to the international bond market in June 2015 with a debt issuance of $1.5bn, a segment of a larger $10bn bond programme.
Damien pointed to economic instruments and bonds as import financial instruments to diversify funding sources and extend repayment periods to ensure stability in the Egyptian market.
He also addressed the Egyptian government’s recent attempts to reform the civil service sector. Payments to employees currently constitute 25% of the state’s budget. Diverging for a narrative that often presents the restructuring as an austerity measure, Demian called the policy an attempt to control the rates of wage increases to provide more resources for development projects and disadvantaged areas, which lack infrastructure and sanitation. This is part of the government’s plan to re-prioritise public spending.