Egypt Defers New Projects That Need USD As Part of Regulations to Rationalise Public Spending

Egypt’s Prime Minister Mostafa Madbouly has issued a number of regulations for state bodies to rationalise public expenditure amid the ongoing global economic crisis, including postponing new projects that need US dollars and have not yet started.

The regulations will remain in effect until the end of the current fiscal year 2022/2023, which ends in June 30.

The regulations do not, however, apply to a number of state bodies, including the ministries of defence, interior, and health, as well as the authorities belonging to them.

The regulations, posted as part of a decree in the official gazette, apply to state bodies that act under the state’s general budget.

The decree bans these bodies from dealing with foreign currency unless they obtain approval from the Ministry of Finance in coordination with the Central Bank of Egypt (CBE) and from relevant authorities.

The regulations come at a time when Egypt is struggling to tackle a shortage in foreign currency and a consequent backlog of goods in ports, due to the economic fallout resulting from the Russia-Ukraine war that broke out in February last year.

Egypt has secured a $3 billion loan programme from the International Monetary Fund (IMF) in December to tackle the severe impacts of the war, particularly after foreign investors reportedly pulled billions of dollars since the conflict started.

According to the new regulations, state bodies are to restrict their expenditures to things that are absolutely necessary.

The regulations also stipulate that public bodies restrict business related travelling for their members.

Travelling should only be allowed in cases of extreme necessity and after obtaining the approval of the PM.

Travelling would also be allowed in cases where the state body bears the travel costs.

The minister of finance will submit a periodic report every two months to review the extent of the public bodies’ compliance with the decree.

Exempted bodies The Ministry of Health as well as its authorities, university hospitals, and bodies that provide health services and medical care are exempted from the aforementioned regulations, the decree read.

Furthermore, the decree does not apply to the Ministry of Defence, the Ministry of Interior, the general office of the Ministry of Foreign Affairs.

It does not also apply to authorities in charge of securing food commodities and petroleum and gas products.

The decree also does not impact payment of interests and loan repayments that are scheduled on the state bodies’ budgets. It does not also affect allocations to treat employees and others, including students.

Subvention paid to workers and others, money paid as solidarity pensions, and Takaful and Karama cash transfer programme will not be affected as well.

Rationalising spending The decree bans spending money on training grants or rewards. It also bans allocating money for scholarships whether in Egypt or abroad.

It bans allocating money to social, sports, and recreational services for employees. Allocating money for monthly and seasonal social subvention is also banned.

Spending on in-kind benefits, including food and clothes, should not exceed the value of spending during the last fiscal year 2021/2022, read the decree.

The decree also bans any increase in the number of meetings within these public bodies. According to the decree, the number of meetings should not exceed those held in the last fiscal year and the allowance for attending each meeting is to be reduced by 50 percent.

A minimum of 2.5 percent will be deducted from other appropriations and other areas of public spending that have not been mentioned in the decree.

The decree bans spending money on training programmes, publication and advertising, appropriations for cultural relations overseas, and sports supplies.

Allocating money to be spent during conferences in Egypt and abroad will require prior approval.

In addition, the decree bans allocating money for travel allowances. It also prohibits public bodies' employees from expensing their transportation costs in case they are abroad. Allocating money for organising exhibitions and conferences in Egypt or abroad is also forbidden.

According to the decree, a minimum of 10 percent will be deducted from all appropriations that have not been mentioned in the decree.

The decree also bans spending on social and sports services to nonemployees, subvention to youth centres, and awards and medals.