After flagging FY 2022-2023 budget allocations for subsidy + social safety net spending, MPs are zeroing in on tax receipts: MPs at the House Planning and Budgeting Committee are skeptical that the government’s forecasted tax revenues for the upcoming fiscal year are attainable, suggesting in a committee meeting yesterday that the target needs to be revised downwards. The draft FY 2022-2023 budget, which Finance Minister Mohamed Maait presented to the House of Representatives earlier this month, has penciled in EGP 1.2 tn in tax receipts, up from EGP 950 bn at the end of the current fiscal year and EGP 834 bn in FY 2020-2021. The forecast suggests tax revenues will grow 26% y-o-y.

“In normal economic conditions, tax receipts usually grow only 12% y-o-y,” said Committee Deputy Chairman Mostafa Salem. “The current economic conditions are by no means favorable to generate such record growth in tax money,” he said.

Gov’t maintains these targets are attainable…: “We expect an increase of around EGP 200 bn in tax receipts in one year — this is not an exaggeration at all,” Tax Authority Chairman Reda Abdel Kader told MPs.

…especially since we’re expected to absorb external shocks: The Finance Ministry expects that the economy will be able to absorb the impact of the war in Ukraine and see GDP growth accelerating in the upcoming fiscal year. “Most international financial institutions expect Egypt to achieve 5.7-6% growth in FY 2022-2023 despite the Russia-Ukraine crisis,” Abdel Kader said. The IMF expects our economy to grow at a 5.0% clip in FY 2022-2023, according to its latest World Economic Outlook, while a poll of economists by Reuters last month penciled in 5.2% GDP growth for the upcoming fiscal year.

We also have something of a precedent — Egypt’s tax revenues grew throughout covid-19: “Despite the pandemic’s negative effect on the economy in FY 2020-2021, growth rates were still high, allowing the state to generate EGP 834 bn in tax receipts, which was higher than the previous fiscal year,” Abdel Kader said.

HEALTHY DEBATE- MPs’ concerns are part of the natural back-and forth between the House and government on its spending plan. Last week, the House Planning and Budgeting Committee raised flags on the government’s allocations for subsidies and social safety programs, suggesting that these spending areas need to be expanded. As we noted in our explainer of how the state budget process works, House committees could push back on key points in the budget as part of their review and discussion of the spending plan.