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Monday, 26 December 2016

Spending on health and education

Spending on health and education fell far short of the constitutional requirement, despite having been raised significantly higher — partially due to a shortage of funds, partially due to a lack of capacity in the two sectors to absorb an influx of cash. This will begin to change in 2017: A new national health insurance scheme — which will include the private sector — may come to life next year in the form of the new Universal Healthcare Act. The Ismail cabinet hopes to expand the number of schools in partnership with the private sector.

The needs of the reform agenda had outweighed the constitutional requirement for health and education spending. While the FY2016-17 saw spending on health and education rise to 4.7% of GDP, it fell far short of the 10% mandated by the constitution (projected then at EGP 3.2 tn). To pass the budget, the Finance Ministry had to compromise with the House of Representatives, raising health and education spending to 10% of the EGP 2.8 tn FY2015-16 budget.

We got our first glimpse of the Universal Healthcare Act in September. The Finance Ministry plans to allocate EGP 5 bn to the Health Insurance Authority, the state entity in charge of funding the health insurance program once the law passes Parliament. Under the health scheme, employers must pay into the national health insurance scheme a sum equivalent to 3% of an employee’s salary, while 1% of the salary will be deducted from an employee’s paycheck. Funding for the program will also come from taxes on alcohol, cigarettes and nightclubs. The law would require the government to upgrade and modernize the 550 hospitals it operates to provide better service. The government hopes to get the legislation passed in 2017.

The private sector will help with schools. A EGP 15 bn public-private partnership program which aims to build private-sector administered schools targeting medium-income families with a total capacity of up to 60k classrooms by 2018 was announced last year. A tender for 200 schools under the program was announced in November, generating interest from some 79 companies, including from Orascom Construction and BPE Partners which locked down a UAE partner.

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