Government austerity in Egypt.. A parliamentarian demands that the government provide an account of decisions to rationalize spending

- An Egyptian parliamentarian submitted a briefing request to the government regarding the repetition of decisions to rationalize public spending, calling for an evaluation of the results of previous measures and the disclosure of the size of the financial savings achieved, at a time when the government approved a new package of measures to control expenditures and rearrange spending priorities for a period of three months, to confront the economic repercussions of regional tensions and the increasing pressures on the state’s general budget. A member of the House of Representatives and the parliamentary body of the Justice Party, Mohamed Fouad, who submitted the briefing request, said that the new rationalization decision represents a positive and required step in light of the current economic pressures, but repeating these measures without a public evaluation of the results of the previous decisions empties them of their content, and requires presenting a clear statement of account regarding what their goals have been achieved.

Fouad explained, on his Facebook page, that the briefing request aims to oblige the government to disclose the size of the targeted and actually achieved savings, the extent of government agencies’ commitment to implementation, and the value of expenditures and projects that have been stopped or postponed, while distinguishing between the real reduction in spending and the mere transfer of commitments to later years, and measuring the impact of this on the budget deficit, public services and investments. He added that the request also includes a review of the economic and financial assumptions on which the current budget was built, and the extent of their updating in light of developments in exchange and energy rates and the cost of borrowing, as well as an assessment of the efficiency of risk management and reserves allocated to absorb shocks, and their effects on the deficit, public debt and financing needs.

The Council of Ministers, headed by Mostafa Madbouly, approved a draft decision on rationalizing public spending by the entities included in the state’s general budget and public economic bodies for the fiscal year 2026/2027, for a period of three months, with the possibility of extending its work according to developments. The measures included reducing electricity and lighting consumption in government agencies by 20%, and fuel allocated to government vehicles by no less than 30%, not contracting to purchase new passenger cars until June 30, 2027, rationalizing travel abroad, and slowing down the implementation of fuel-intensive national projects, in addition to postponing newly listed projects and not concluding new contracts regarding them during the specified period.

It also included prohibiting spending on advertising, parties, receptions and public relations, and restricting participation in conferences and exhibitions without prior approvals. The decision excluded the sectors of health, university hospitals, education, drinking water and sanitation, the “Decent Life” presidential initiative projects, and projects related to national, water, food, and energy security, in addition to pension allocations, the “Solidarity and Dignity” program, and support for food supplies, petroleum materials, and gas.

In a context related to the financial objectives of the plan, Ahmed Kajouk, Minister of Finance, said in press statements on the sidelines of the Cairo Telecommunications Exhibition that the government aims to achieve savings ranging between 45 and 50 billion pounds (about 840 to 933 million dollars) from measures to rationalize spending and energy consumption, pointing to achieving savings of about 7 billion pounds (about 130.6 million dollars) during the last quarter of last year, with the government to evaluate the results of the new measures after three months. Last March, the government took similar measures to rationalize public spending, which included controlling government expenditures, rationalizing resource consumption, and postponing some unnecessary spending.

Economist Walid Jaballah said that the measures to rationalize public spending do not aim to reduce the budget deficit as much as they aim to limit the potential damage to its targets, in light of the changes that occurred in the economic assumptions on which the budget was prepared, most notably oil prices. Jaballah explained that the state’s general budget was drawn up according to assumptions, including that the price of a barrel of oil would reach about $75, while prices are witnessing levels approaching $100, which imposes additional pressure on the general budget and leads to an increase in spending burdens, which prompts the state to rationalize government consumption.

Jaballah added, in exclusive statements to Ofek News in Arabic, that the rationalization measures taken by the government also carry a message to citizens, civil society organizations, and the industrial sector of the necessity of adopting similar measures to rationalize consumption and regulate the use of resources, especially since confronting economic pressures is not limited to government measures alone, but rather requires the participation of various parties in society. He pointed out that spending rationalization measures are divided into two types: The first is the traditional measures that the government is accustomed to taking, such as reducing conferences and events and rationalizing travel abroad, and the second is related to additional measures aimed at reducing energy consumption, considering that what the government announces represents the maximum that it can do within the framework of its powers and capabilities, while the culture of rationalization must extend to individuals, institutions and the industrial sector.

Regarding the extent to which the new measures are able to achieve their goals, Gaballah stressed that their effectiveness is related to the duration of the crisis, as they help reduce the expected damage to the Egyptian economy, but they do not completely eliminate these damage. He added that the continuation of tensions related to Iran, and the fact that energy and shipping prices remain at high levels, may impose the need to take perhaps greater measures than those currently announced by the government, as the nature and severity of the measures will depend on the extent of the difficulty and persistence of the economic conditions. If the crisis ends, the need for exceptional rationalization measures will end, according to him. Regarding the government’s repeated resort to rationalization decisions, Jaballah considered that “these measures should not be evaluated based on the size of the direct financial savings only, but rather through the damages that they succeeded in reducing, especially since rationalization does not necessarily mean achieving specific financial savings that can be measured directly, as much as it means reducing the burdens and pressures that the budget and the economy could have been exposed to, which are damages whose value is difficult to determine with an accurate figure due to their connection to changing economic conditions.”

Jaballah expected that the effects of these measures would impact some economic activities, explaining that “there is no economic decision without side effects, and every measure has its cost and consequences, especially since the previous expansion in the implementation of national projects had positive effects in providing job opportunities and making changes in the infrastructure, but at the same time it was accompanied by an increase in the volume of debt as a result of financing some of these projects through external borrowing.” He added that slowing the implementation of projects currently contributes to alleviating the state's financing needs, but in return, it may lead to a decline in the ability of these projects to provide new job opportunities, which reflects the existence of a trade-off between alleviating financing pressures and maintaining employment and investment rates.

He said, "The issue is not related to the absolute comparison between expanding projects or slowing down their implementation, but rather choosing the appropriate timing to take each measure," noting that the government, under the current circumstances, "does not have many alternatives to the measures it announced, even if they result in some side effects, including the impact on the creation of new job opportunities during that period." For his part, economic expert, Mustafa Badra, said that the rationalization measures serve as a short-term hedging plan aimed at dealing with potential economic repercussions.

Badra added, in exclusive statements to Ofoq News in Arabic, that there are no official figures announced yet regarding the value of the targeted savings, but he believes that arranging between 50 and 60 billion pounds (about 933 million to 1.12 billion dollars) during the three months represents a possible estimate, stressing the necessity of waiting for the end of the implementation period and announcing the actual results before judging the success of the plan. Badra stressed that "the success of rationalization measures is evaluated through the numbers announced by the government after the end of the implementation period, especially since announcing the size of the actual savings is the criterion by which the extent of the success of the measures can be determined. The government also indicated the possibility of directing the savings that may be achieved to priority sectors, such as health, education, food supplies, and oil and gas needs, according to actual needs. However, determining the size of these allocations remains linked first to knowing the value of the savings that have been achieved."

Badra warned that continuing the measures for a longer period may raise questions about the extent to which they extend to society and citizens, explaining that “the government talked about the possibility of extending the application period for an additional three months, but it is important to follow the results of the first phase to find out whether the current measures are sufficient or whether other measures will be needed.” Regarding the postponement of national projects, Badra believed that “it may lead to a slowdown in economic activity, but it may be limited if it is limited to the scheduled three months and the exceptional circumstances associated with wars and their repercussions and risks end. However, continuing to postpone projects for longer periods may have economic repercussions, given the role that national projects play in stimulating the labor market, increasing capital turnover, providing employment opportunities, and stimulating demand for products and services.”