Egypt Implements New Amendments to the Unified Public Finance Law

On March 30, 2024, the President of Egypt issued Law No. 18 of 2024 (the “Law”) introducing amendments to the Unified Public Finance Law No. 6 of 2022 (the “Unified Public Finance Law”).

The Law extends the timeline for implementation of the system of budgeting by chapters and items – along with program and performance budgeting – from four (4) to six (6) years from the date of the Unified Public Finance Law’s enforcement. Additionally, it emphasizes the need to consider the development of functional and administrative structures, as well as the capabilities of monitoring bodies, to enable the implementation and control of the system. The Law also highlights the importance of developing a monitoring system that aligns with program and performance budgeting, aiming for efficient and effective utilization of state resources and the achievement of the general plan for economic and social development and strategic objectives of the State.

Expanded Scope of Financial Oversight and Control and Prohibition of Financial Burdens on the State’s Public Treasury:

The Ministry of Finance’s opinion must be sought for draft laws that would impose additional financial burdens on the State’s public budget. Draft decisions that would directly or indirectly impose financial burdens on the State’s public treasury. This includes burdens related to revenue or expenditure, and they can be anticipated or potential, positive or negative.

Furthermore, the administrative authorities must obtain the approval of the Ministry of Finance for draft decisions that would impose financial burdens on the public State treasury, unless those burdens are already included in the State’s public treasury. This requirement applies before the draft decisions are issued by the competent authority.

The Law provides that all responsible parties are prohibited from incurring any expenses, entering into contracts, financial agreements, protocols, or any other actions that may directly or indirectly impose financial burdens, whether positive or negative, on the State’s public treasury without obtaining approval from the officials responsible for budget management within the entity.

Furthermore, the Law prohibits all responsible parties from incurring expenses, entering contracts, financial agreements, protocols, or any other actions that may directly or indirectly impose financial burdens on the State’s public treasury. This includes both positive and negative financial impact.

Representatives of the Ministry of Finance in the accounting units are now prohibited from approving any disbursements before ensuring the existence of a financial commitment or the specific provision of law that permits disbursement. This ensures that proper financial commitments are in place before funds are disbursed.  The amendment adds a requirement that projects must be included in the general plan for economic and social development or have obtained approval from the Ministry of Finance or the Ministry of Planning and Economic Development. This requirement applies specifically to the acquisition of non-financial assets and investments. In the event of non-compliance with the said provisions administrative entities, their officials are not permitted to request financing or include additional appropriations from the State’s public treasury.

Approval Requirement for Special Regulations:

According to the Law, an administrative entity cannot issue special regulations that would impose financial burdens on the State’s public treasury without obtaining written approval from the Ministry, as the State’s public treasury is not obligated to manage any financial burdens related to special regulations that are not approved by the Ministry of Finance.

New Definitions:

The Law added new definitions which are “Public Government Budget’ and “Public Government Debt.’ These definitions follow the definition of ‘Public Finance’ and ‘Functional Classification. The “Public Government Budget” refers to a statement that outlines the total resources and uses of the State’s public budget and the resources and uses of all public economic entities. It excludes inter-budgetary relationships and does not affect the nature of their work, legal status, budget preparation, accounting systems, or their relationship with the state treasury. The “Public Government Debt” includes the debt of the public budget of the state and the debt of the public economic entities, after excluding the mutual relationships between them.

Calculation of Public Finance Indicators and Annual Maximum Limit for Public Government Debt:

The Law mandates that all indicators of public finance be calculated based on the resources and uses of the public government budget. The Law also empowers the Council of Ministers to establish an annual maximum limit for the value of the public government debt, based on the Council’s presentation and as a percentage of the expected domestic product for the fiscal year.

The annual maximum limit of the public government debt cannot be exceeded except in cases of necessity and national emergencies. In such cases, it must be presented to the President and approved by the Council of Ministers and the House of Representatives to amend the State’s public government budget. The maximum limit of the public government debt will be taken into account when calculating the indicators of public finance.

The values of resources and uses of public economic entities will gradually be included within the resources and uses of the public government budget over a period not exceeding five (5) fiscal years. This implementation will follow a timetable approved by the Council of Ministers based on the Ministry of Finance presentation. The calculation of public finance indicators will be guided by the resources and uses of the State’s public budget and the values of resources and uses of the public economic entities included according to the laws governing the State’s public budget. Once the inclusion of the values of resources and uses of all public economic entities is completed, the mutual budgetary relationship will be excluded based on the law governing the State’s public budget.