Former Egyptian Finance Minister Samir Radwan warned of a severe financial crisis to hit the country if serious steps are not taken to salvage the collapsing economy.
“Foreign investment in Egypt is now at zero percent,” he told Al Arabiya. “In fact, investment outside Egypt has reached two billion dollars.”
Radwan said the budget deficit of the last year was much more than expected and has amounted to 170 percent.
“In the new budget, spending is estimated at 534 billion Egyptian pounds and the revenues do not exceed 393 billion. This means a deficit of 135 billion.”
Radwan said that when in office he submitted several suggestions about ways to handle the crisis, but they were rejected by the Supreme Council of the Armed Forces, the then de facto ruler of the country.
What aggravates the problem, he added, is the series of strikes that reflect the demands of several sectors of the Egyptian economy.
“Some of those demands are legitimate, while others are not. The problem is that average citizens are not really aware of the economic situation.”
As for using tax increases to solve the deficit problem, Radwan stressed the importance of the social equality factor.
“The rich should take part in solving the deficit problem through paying more taxes while this should not be the case with the poor who should get a higher level of tax exemption.”
Radwan explained that the upper limit to tax exemption is an annual income of LE 9,000 and said it should be raised to 12,000.
“As for taxes, we can increase taxes to a maximum of 20 percent, but we can’t make it 35 percent like the United States or else tax revenues will decrease remarkably. In all cases, taxes should be revised every three to five years.”
According to international regulations, Radwan pointed out, taxes should not be imposed on issuance and capital.
“Taxes should be imposed after making profit which means that it is the revenue that should be taxed.”
When asked about the International Monetary Fund loan, Radwan said that borrowing is a necessity in order to face the budget deficit and reduce it to a safe 6 percent by 2015 like the Ministry of Finance plans to do.
“The problem with that loan is lack of transparency when it comes to its terms and conditions. The people are calling for social justice and that is why they need to know how the loan would affect them.”
As for the proposed tax on mobile phones, Radwan said it will not be that big but when added up can be beneficial for the state.
“But it will be a good source of revenue since Egyptians are obsessed with mobile use,” he said.