Reform program in the government finance sector for the Arab Republic of Egypt 2020
According to the Board of Executive Directors’ resolution number (1) of 2020, the Arab Monetary Fund (AMF) extended a loan to the Arab Republic of Egypt with the amount of Arab Accounting Dinar (A.A.D.) 153.475 million (equivalent to about US$ 639 million), under the framework of the Structural Adjustment Facility in the Government Finance Sector. The loan supported a reform program in the mentioned sector, agreed between the AMF and the Egyptian authorities, covering the year 2020.The loan was provided to support efforts of the Egyptian authorities in preserving the gains achieved as a result of the government's efforts to strengthen the fiscal position and enhance the efficiency of public financial management.
The program was based on five pillars: strengthening budget preparation and implementation process, developing tax administration, strengthening government procurement management, promoting the social protection system, and strengthening public debt management.
The goal of strengthening budget preparation and implementation was to promote the budget preparation process, enhancing the effectiveness of fiscal performance, and achieving fiscal consolidation, through a gradual transition to the program budget. It also aimed at strengthening the medium-term fiscal framework, in a way that supports fiscal planning and the budget preparation cycle, in addition to developing an integrated government financial management system.
Regarding the pillar of tax administration development, it aimed at developing mechanisms to integrate the parallel market into the official market, reduce tax evasion, simplify and accelerating tax procedures. It also aimed at drafting a tax law on treatment of small and micro enterprises, including the adoption of simple procedures to enhance tax compliance, revision of exemptions, promotion of fiscal digitization, and the development of tax statistics.
With respect to the pillar of strengthening government procurement management, it aimed at enhancing transparency, raise the efficiency of government spending, in terms of advance planning for contracting, efficient management of inventory, ensuring the quality of government services, preparing procurement contracting models and guidelines, enhancing the capacity building, in addition to digitalization of procurement and contracting process.
As per the Pillar of promoting the social protection system, it included measures aimed at developing an advanced and comprehensive system of social protection to ensure efficient allocation of financial resources and protecting the low-income groups. it also includes measures to strengthen social safety nets and health insurance system, rationing energy and food subsidies, strengthening social insurance system, in addition to enhancing the “Takaful” and “Karama” programs.
With respect to strengthening public debt management, it aimed at reducing cost of public debt, strengthening and revitalizing the secondary market for public debt instruments, activating the role of market makers, restructuring public debt management, enhancing the efficiency of public debt statistics and government guarantees system, in addition to developing mechanism for managing public debt owed by public corporations and institutions.
During 2021, the agreed reform program was followed up by the AMF to determine the progress of implementation. The Fund found that the Egyptian authorities had made progress in implementing the program, and the second installment of the loan, amounting to A.A.D. 65.775 million was withdrawn.
Reform program in the government finance sector for the Kingdom of Morocco 2020
The AMF, according to the Board of Executive Directors’ resolution number (14) of 2020, extended a loan to the Kingdom of Morocco with the amount of A.A.D. 51.406 million (equivalent to about US$ 211 million), representing 125 per cent of the country’s share in the Fund’s paid-up capital in convertible currencies, under the framework of the Structural Adjustment Facility in the Government Finance Sector. The loan supported a reform program in the mentioned sector, agreed between the AMF and the Egyptian authorities, covering the period (June 2020 – June 2021).
The loan was provided to support efforts of the Moroccan government over the past years to implement reforms in the government finance sector, in addition to deepening and expanding these reforms in a way that enhances the fiscal position, supports economic stability, maintains fiscal stability, achieves sustainability of public debt, enhances the efficiency of spending and collection of public resources, and enhances social protection programs. The loan supported Moroccan government efforts geared towards restructuring public spending, enhancing the efficiency of public financial management, as well as its ability to address challenges and repercussions of Covid-19 pandemic on government finances.
The program was based on four pillars: strengthening budget preparation and implementation process, strengthening government procurement management, promoting tax administration, and strengthening public debt management.
With regard to strengthening budget preparation and implementation process, it aimed at enhancing the efficiency of planning, implementing and following up the public budget, in a way that strengthens the linkage between budget operations, strategic framework and general objectives of the country. The Pillar of strengthening government procurement management aimed at enhancing transparency and competitiveness, efficiency of public expenditures and the quality of services provided, as well as strengthening the economic dimension in public procurement as a lever for sustainable development. As for the pillar of promoting tax administration, it aimed at improving the efficiency of tax operations and enhance taxpayers’ confidence through reducing tax burden on individuals and establishments, rationing tax exemptions, and enhancing digitization of tax management. Regarding the pillar of strengthening public debt management, it aimed at reducing cost of public debt and enhancing secondary market for government public debt instruments. It also aimed at ensuring stable source of government financing through strengthening the role of market makers, expand the investor base, enhance the role of “sukuk” instruments as a source of financing, reduce the risks of refinancing government issuances, and enhance the liquidity of Secondary market for government securities.
During September 2021, virtual meetings and consultations were held with Moroccan authorities to follow up the progress in the implementation of the agreed program. The Fund found that the Moroccan authorities had made progress in implementing the program, and the second installment of the loan, amounting to A.A.D. 20.562 million was withdrawn.
The Kingdom of Bahrain Fiscal Balance Program 2018
On Thursday, October 4, 2018, an agreement on Arrangements for Fiscal Cooperation was signed between the governments of the Kingdom of Saudi Arabia, the United Arab Emirates, the State of Kuwait and the Kingdom of Bahrain, and the AMF, as an advisory body, with the aim of supporting the Kingdom of Bahrain in implementing fiscal balance program covering the period (2018-2022). On Friday, October 5, 2018, two bilateral agreements for financial cooperation were signed between the Ministry of Finance of the Kingdom of Saudi Arabia and the Kingdom of Bahrain, and between the Ministry of Finance of the United Arab Emirates and the Kingdom of Bahrain, in addition to the AMF as an advisory body. Also, on Tuesday, April 2, 2019, an agreement on financial arrangements was signed between the Kuwaiti Ministry of Finance and the Kuwait Fund for Arab Economic Development, the Government of the Kingdom of Bahrain and the AMF as an advisory body.
The program aims to restore the public budget balance, contain public debt, and achieves the fiscal sustainability in the medium and long term. The program aims to achieve a balance between government revenues and expenditures by 2022 and a surplus in the primary balance by 2020. The program includes six main initiatives represented in reducing the operating expenses of the government, introducing an optional early retirement program for the government employees, improving the efficiency of the Electricity and Water Authority to achieve a balance between its revenues and expenditures by 2022, improving the efficiency and fairness of direct government subsidy, as well as the efficiency of government spending. In addition, the program includes measures to facilitate government procedures and increasing non-oil revenues, including the implementation of value-added tax. The program's initiatives were strengthened, and its time frame was extended to achieve the target of fiscal balance by 2024, considering the effects of the COVID-19 pandemic. The AMF continues its efforts of following up the performance and providing technical support for the program, in consultation with the Bahraini authorities.