the research and innovation system in egypt - ARTI Puglia

which constituted the bulk of total domestic taxes, due to recent tax reforms. This trend is likely
to gradually widen the tax base in the forthcoming years. Revenues, however, have remained
more or less constant (about 21%) as a percentage of the GDP over the past few years.
On the expenditures side, strong expenditure growth has remained a main feature of
the budget. This is mainly a result of continued strong expansion of (1) the public-sector
wages driven by government pledges. Wages and Compensations increased from EGP
30,5 billion (€ 7,02 billion) in FY2002 to EGP 59,6 billion (€ 7,39 billion) in FY2008; (2) high
interest payments on the public debt stock. Interest payments rose from EGP 21,8 billion
(€ 5 billion) in FY2002 to EGP52,0 billion (€ 6,45 billion) in FY2008. Importantly, dramatic
increase in domestic debt which is projected to be roughly 62% of GDP in FY2008 up from
58,4% in FY2002; and (3) the costs of food and energy subsidies, which rose from EGP
18,0 billion (€ 4,15 billion) in FY2002 to EGP 64,5 billion (€ 8 billion) in FY2008.
The overall deficit, after adjusting for net acquisition of financial assets, remains almost
unchanged from the cash deficit. The budget’s overall deficit of EGP 43,8 billion (€ 10,07
billion) or -10,2% of GDP for FY2002 has become 49,2 billion (€ 6,35 billion) in FY2007, so
that is narrowed to -6,7% of GDP. Deficit is financed largely by domestic borrowing and
revenue from privatization sales, which became a standard accounting practice in budget
Egypt. The government aims at more sales of assets in FY2008.
1.9. Exchange Rate policy
The exchange rate policy is linked to US Dollar. With the turn of the new millennium, Egypt
introduced a managed float regime and successfully unified the Pound exchange rate visà-vis
foreign currencies. Currency black markets do not exist anymore. The transition to
the unified exchange rate regime was completed in December 2004. Shortly later, Egypt
has notified the International Monetary Fund (IMF) that it has accepted the obligations of
Article VIII, Section 2, 3, and 4 of the IMF Articles of Agreement, with effect from January
2, 2005. IMF members accepting the obligations of Article VIII undertake to refrain from
imposing restrictions on the making of payments and transfers for current international
transactions, or from engaging in discriminatory currency arrangements or multiple
currency practices, except with IMF approval. Egypt thus assured the international
community that it will pursue economic policies that will not impose restrictions on the
making of payments and transfers for current international transactions unnecessary, and
will contribute to a multilateral payments system free of restrictions.
In the fiscal year 2004 and over most of the fiscal year 2005, the pound depreciated
against the US Dollar. Since the second half of the fiscal year 2006 until the present time,
the pound gradually appreciated to EGP 5,35 per USD.
1.10. Investment
Egypt’s location astride trade routes linking Asia, the Middle East and Europe is a key
selling point when officials meet with potential investors. So far, the government has done
well competing against nations such as Turkey for the right to host companies looking for
an export platform to serve consumers in Africa and the Middle East.
18 the research and innovation system in Egypt