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Egypt has introduced a capital gains tax and increased public spending by a quarter in its first budget after the fall of Hosni Mubarak, the former president who was ousted in February by protesters demanding freedom and social justice.
The budget for the fiscal year to start in July, presented by Samir Radwan, finance minister, forecasts expenditure of $86.5bn, up from $69.5bn last year.
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The deficit is expected to widen to 10.9 per cent of gross domestic product from 8.6 per cent this year.
Meeting the soaring economic expectations of Egyptians after the revolution has been one of the biggest challenges facing military rulers who are in power pending the completion of a transition to elected rule.
The new authorities have been under enormous pressure to raise salaries and increase spending on subsidies and low-cost housing to ease widespread poverty. Expenditure on public sector salaries is to rise by 20 per cent.
Fuel subsidies, which account for almost a fifth of government spending, have also gone up by 32 per cent to $16.6bn. Food subsidies rose 26 per cent to $3.76bn.
To help finance the increases the government has raised tax on cigarettes by 10 per cent and introduced a 10 per cent capital gains tax.
There is also a 25 per cent top tax rate for corporations and individually-owned companies with incomes above $1.6m. The previous rate was 20 per cent.
“This is not such a big increase and it kicks in at a very high level of income,” said Angus Blair of Beltone Financial, a Cairo-based investment bank.
“I don’t think the capital gains tax will have a significant negative impact. I think people will realise that it is part and parcel of the new Egypt.”
Mr Radwan expects growth to reach 3.2 per cent in the next fiscal year, up from 2.6 per cent this year.