Abstract
In the light of the theoretical & the practical analysis of public spending and its development within the framework of Economic Reform and Structural Adjustment Program in Egypt, the study ends to the following results: economic development in Egypt requires an economic transformation with a self-planned-medial approach, not just an economic reform with subordination of international institutions. The study found, through descriptive analysis that the high growth rates after the beginning of the economic reform in Egypt was based on Rentier returns rather than productivity based ones, which involves an inverse relationship with the goals of the desired development in Egypt. Also the Egyptian economy lacks cumulative and continuity in growth over a long time and the economic growth in Egypt still depends heavily on the traditional factors of production. This is as well as weak domestic savings, not to mention the modest rate of formation and capital accumulation. And to the fact that the structural problem facing the Egyptian economy is not in the fact that the service sector is the dominant sector, but the problem of the Egyptian economy is the fact that the bulk of the services is provided by the traditional services with a limited value-added provided by a large number of small and irregular institutions, while in the advanced countries this services is characterized by advanced services with high technology, especially in communications , information services, financial services and tourism, as well as education and health services.
The study investigates the Keynesian view and the Wagner’s Law on the role of public expenditure on economic growth for Egypt (1975-2011). The econometrics results supports both Keynes view and Wagner’s Law in the short run, while it supports Keynes view in both long run & short run. The empirical results also found that there is a static and complementary long-term relationship between the relative increase in the consumption items of public spending and annual inflation rates. And that there is an inverse relationship between the evolution of the public spending structure in light of the recommendations of the International Monetary Fund and the economic development needed according to the reality of the Egyptian economy. This is beside that there is a direct correlation between the restructuring of public spending and the facing of the problem of stagflation in Egypt, which may also include the achieving of equity in income distribution. Thus increasing public investment projects and the partnerships between the public and the private sector may be the solution to the problematic role of the state and the road to achieve the economic transformation in Egypt.
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