BUDGETING DURING UNCERTAINTY: BUDGETING AND PUBLIC SPENDING IN POST- REVOLUTIONARY EGYPT

Abstract

Most of the literature on budgeting focuses on the study of the budget process during times of political stability. There is little research on what happens to the budget process and to public expenditures when countries experience political instability and regime change. This dissertation attempts to fill this gap in the literature by studying how the political and economic uncertainty that result from revolution and regime change affect the budget process and public spending through a study of the Egyptian budget process and patterns of public expenditures following two revolutions and a transition period marked by instability. The analysis utilizes budget data and interviews with officials from Egypt’s Ministry of Finance.

This dissertation identifies the challenges decision makers face in preparing and executing the budget in Egypt after the 2011 and 2013 revolutions. Findings from this research indicate that planning and preparing the budget was a challenging task as new and sudden political and economic events brought about new realities almost every day and necessitated mid-year adjustments. The political environment was characterized by rising dissent, protests, increasing public demands and security challenges. This volatility contributed to increasing expenditures on salaries of government employees, subsidies and social programs. The worsening economic situation that resulted from political instability added more pressures on the public purse and resulted in increasing spending. For the same reasons, spending on investments and developmental expenditures declined. More spending also meant increasing deficit, accumulation of more public debt and increasing interest payments which leads to further deterioration of the fiscal standing of the country. This research also finds that as the political environment started to stabilize the new government initiated bold reforms that involved cutting fuel subsidies and enacting a new civil service law to control the increase in salaries. Savings made from reducing fuel subsidies are directed to increase spending on investments, on health and education and on better targeted transfer programs.