Fiscal Governance in Egypt: Strengthening Budgetary Institutions to Counteract Political Fragmentation

The paper contributes to discussions on budgetary institutions and fiscal governance in Egypt. It explores the interrelationships between budgetary institutions, political factors and fiscal performance. We investigate the intricacies between the structure and quality of budget institutions and fiscal performance and the key weaknesses in budgetary institutions in Egypt. We also analyze to what extent these weaknesses aggravated adverse effects of political fragmentation on fiscal performance in Egypt. Finally, we highlight the major challenges in the institutional-political-fiscal paradigm in Egypt. Added to the known medium-term reforms in budgetary institutions, the paper recommends three urgent reforms in these institutions. The first procedure is applying a top-down approach during budget vote to be on two separate stages. In the first stage of budget vote, the parliament votes on the fiscal aggregates, while in the second stage the parliament votes on the allocation of resources to different sectors. The second procedure that should be urgently adopted is applying balanced budget rules or at least reactivating the golden rule to control the current budget deficit. The third procedure is related to off-budget expenses. Fiscal relations between budget and economic authorities should be transparent and documented explicitly in the budget to reflect the real annual values of public expenditure and the budget deficit. In this regard, however, since budget preparation and implementation are based on a fully cash accounting base, documenting the total values of transfers that accrued to economic authorities appears to be a crucial procedure.