The State Budget

The Financial program or plan of the government

activities for a coming fiscal year.
Comprehensive structure of all estimated public
revenues and proposed public expenditures.

The Four stages of the State

Budget
1. Formulation
- Long and complex process.
- Participation of different departments and levels.
- Consists cutting, trimming, rearranging.
2. Reviewing and enactment
-Submitted to the parlement.
- Separate parts by different subcommittees.
-The eligibility of altering and reconsidering.
- But within certain limits.

3. Implementation ( Execution )
- Every department spends and collects revenues.
4. Control and Auditing
- The parlement revises and audits the financial performance
of governments departments.
- Vital to discover and discourage any fraud.

Principles of the State Budget

1- Yearly Covers all seasons.

2- Comprehensiveness No deductions of
expenses.
3-Condominium No specific fund to be
appropriated for certain activity.
4-Clarity
Clear
and
digestible
by
parlment, members executing
studying all appropriations not total
but classified.
5- Accuracy All figures (Expenses
Returns) accuracy and care
Inaccuracy leads to unbalanced
budget.

Two approaches
Revenues.

for

formulation

of

Public

1- Accounting approach
Based on rate of the recorded
growth of public
spending in pervious year for
each source.
2- Economic approach
Based on national economic
parameters.

The framework governing the State Budget of

Egypt.

A)

The
article
No.
124
of
the
Constitution
The Budget draft must be presented
to the parliament at least 3 months
before the beginning of the fiscal
year.
The Law No. 53 of 1973 (Executive
Regulations of the Budget) amended
by Law No 8712005.
The Budget is the financial plan to
achieve
objectives
within
the
general plan (Economic, Social and

C)

The Budget includes all uses and

resources
performed
by
its
administration.
1- All ministries.
2-Local governments units including
governorates.
3-Public organizations, agencies and
finance funds.

Budget of Economic Organization

As petroleum organization and
Suez Canal Authority

Classification of the Egyptian State Budget.

Eight Chapters of General Expenses

1Wages
and
Compensation
of
Employees.
2- Purchase of Goods and Services.
3- Interest.
4- Subsidies, Grants and Social
Benefits.
5- Other Expenditures
6- Purchase of Non- Financial Assets
investments
7- Acquisition of Domestic and

. Classification of the Egyptian State Budget

Five Chapters of General Revenues

1- Taxes.
2- Grants.
3- Other Revenues.
4- Receipts of Lending and
Financial
Assets.
5- Borrowing.

The State Budget Circular :

The Minister of Finance issues a circular :
Values
to
administrations
budgets.

be
applied
by
when preparing

the
their

Organizational of Budget Formulation :

The ministry of finance

consolidated budget.

prepares

the

- Each minister is responsible to justify his

proposals
- Coordinating with:
Central Bank
Central Agency for Organization and

- The Minister of Finance submits the

draft to the cabinet council
* The final approval by the president.
* The draft is forward to the house of
representatives.
* The draft is attached by note.
* Specific committees discuss the draft
with the
ministry of finance. The final draft is
sent back
to the president for a decree to be
approved by

* Public budgets is one of the crucial

finance control tools.
- Voting on the draft is performed one
chapter after another.
- The house of representatives may not
amend the draft budget without the
government approval.
- According to the law each department
will
be
authorized
to
use
its
appropriations.
* Exceeding the limit of appropriations of
any chapter is not permitted without the
referral to the Ministry of Finance and
the
approval
of
the
house
of
representatives.
* The law allows internal transferring of

Formulation of the State Budget

Preparation of budget estimate
forms and instructions
The Budget Circular
Preparation of revenue and
expenditure estimates agencies
Review and consolidation of agency
requests by competent ministries
Transmission of ministry requests to central agencies
Central Bank-Central Agency for organization and
management-ministry of planning
Negotiations between competent
ministries and central agencies
Preparation of draft budget
Cabinet approval of budget.
Transmission of revisions
Final budget submitted to the
parliament for approval

Forms of the State Budget

(1) Traditional Budget

1- Organized on the basis of agencies

without regard to interdependencies
among different agencies.
All costs of particular activities are
not revealed Estimation of benefits is
difficult.
2- Organized to stress inputs without
reference to output.
3- Is a strictly one-year basis without
regard to future.

(2) Modern Budgets

A Program budgeting replacement of the

traditional performance budget.

Elements of program Budgeting

1- Program classification of the Gov.

transactions.
2- Performance measurements.
3- Performance reporting.
Descriptive account of the work plan of
each department.
The classification of Gov. transaction
into programs.
Measurement
of
costs
and
productivity.
Acceptance of a specific responsibility
by departments.

The characteristics of program Budgeting

1950 Defense Department U.S.A

Limited success to solve the
problem of interdependency.
1.The
program approach stresses the
1.
end product.
It is designed to consider the
pursuit of policy objectives in light of
all economic costs of programs.
2.Stresses
the relationship between
2.
different outputs or programs and
necessary inputs to produce them.
The work of each department is
classified into programs and into
subcategories.
Program budget provides basis to

Program Budgeting and Traditional Budget

Differ in three ways.

1.Express
in terms of goals.
1.
Performance instead of
costs.

by

input

2.Fill
out the program outline with
2.
intermediate missions.
Performance overtime
compare
present and past performance.
3.Outline the outputs and required
over the entire program.
Not only one year or two.

Difficulties facing program Budgeting.

1.Developing
appropriate (suitable)
1.
missions or performance criteria
need quantification.
For not rewarding not compatible
with goals.
2.When
single agency activity in
2.
different programs portions of
agencys costs is arbitrary.
3.Difficulty
to
analyze
the
interdependency among programs.
4.The assessment of costs and benefits
the average instead of the marginal
benefits and costs.

The program Budgeting is usually

inadequate and
should be supplemented with other
techniques.
B P. P. B. S.
Three Levels:

1- Policy Management

- Options Programs
. Formal needs
options
. Selection programs
resources
2- Resource Management

. Analysis
. Allocation

- Budget structure
- Financial management
- Establishment of support systems

The Main Aspects of P P B S.

Three main components

1. Structural Aspects
Classification of Gov. transactions
2. Analytical Aspects
Application of quantification criteria for
appropriate programs.
3. Informational Aspects
Development of supporting systems
policy formulation and appraisal.

Difficulties of Applying PPBS

1. Specification of outputs:
2. Objectives and priorities:
3.

Centralization
Making

of

Decision-

4. Administrative adjustment

Specification of outputs:

Services not clearly distinguished

from the activities involved in the
production of them (education).
Not easily measured.
Many activities involve a number
of sub-products.
Not easily measured.

Objectives and priorities:

Defining objectives and establishing
priorities.
Choosing among various ways of
accomplishing
secondary
objectives.
Actual
cost
are
difficult
to
ascertain even with best methods.
(National defence and foreign
policy cannot be estimated.

Centralization of DecisionMaking:
This lessens innovation and
concentration power.
Seeks to eliminate political
views from decision making.
Significant value judgments.
Depersonalize the relations of
programs with the people.

Administrative adjustment:
Major obstacle Implementation
of programs may be restricted by
the structure of administrative
organization.
There
may
be
no
single
organizational structure could
be
satisfactory
for
implementation
of
programming.

C Zero Base Budgeting

Technique of systematic increases or
decreases in the level of operations of
departments.
Bureaucrats justify their programs at
alternative levels, including a zero
base or low level of operation.
First developed in U.S.A in private
sector in the 60s
Each agency head is required to :

1- Define a minimum level of effort

below existing
effort levels.

Decision Packages

Description of programs to accomplish

the objective.
Analysis of the costs and benefits.
Listing of alternative means.
Various levels of efforts and costs of
each to accomplish the same objective.

Proponents Arguments

Improves the efficiency of operations

by forcing the heads of departments to
consider alternatives.
Allows the use of incremental analysis
in public sector.
Provides constant flow of informations
on
extensions
and
reduction
of
existing programs.

Critics Arguments

Tries to achieve too much.

Involves excessive amount of extra
paperwork.
Too costly, relative to the benefits
received.

Development
Budget :

of

Egypts

State

The state budget for fiscal year

2007/2008 presents the expression
of the financial program for the first
year
of new five years
plan
(2007/2008 2011/2012).
It involves two points :
1. It reflects the new constitutional
amendments
which
effect
the
perspective of the state budget as
an indicator of internal and external
balances.

Development
Instruments :

of

Budget

1. Custom amendments.
2. Income,
3.
4.
5.

stamp and sale taxes

amendments.
Structural
adjustments
in
tabulating the state general budget.
Automation of the components of
the state budget.
Activation of the treasury single
account.

The modification of the state general

budget
classification
aimed
at
clarifying the economic concepts of
the state budget to be accessible to
the ordinary citizen.
This
classification
allows
the
automating the final account in order
to link it with the state budget and
its actual results.
Automation of all public revenues
and expenditures allows utilizing the
modern
electronic
payment