Egypt achieve primary surplus of LE25.3B during July-March: FinMin to parliament

CAIRO – 25 April 2021: Egypt achieved a primary surplus (before interest is paid) during July-March 2020/2021, amounting to LE 25.3 billion (0.4 percent of gross domestic product (GDP)), compared to a primary surplus of LE 40.6 billion (0.7 percent of GDP) during the same period of 2019/2020.

This primary surplus is also compared to a primary deficit of LE 41.6 billion (1.3 percent of GDP) during the same period of the fiscal year 2015/2016, according to Minister of Finance Mohamed Maait.

This came during the Finance Minister's presentation of the financial statement on the draft state budget for the fiscal year 2021/2022, before the plenary session of the House of Representatives, on Sunday, headed by Counselor Hanafy Gabali.

The minister added, "The debt ratio of budgetary bodies decreased to 87.5 percent of GDP in June 2020, compared to 90.2 percent of GDP in June 2019 and 108 percent of GDP in June 2017."

He emphasized that the improvement in financial performance was accompanied by a large increase in government investments, which rose at a large and rapid rate during the period July-March of the current fiscal year by 45 percent to reach LE 164 billion, of which LE 115 billion were investments financed by the treasury, and allocations for the purchase of goods and services increased by 1.4 percent during July-March of the current fiscal year.

Maait noted that the first nine months of the current fiscal year witnessed a significant increase in allocations to the health and education sectors, reflecting the greatest possible interest in meeting the basic needs of citizens and increasing spending on human development, maintenance and infrastructure development in the governorates, which need to spend more and more investments.

The minister referred to a financial provision of LE 127.5 billion to pension funds during the first nine months of the current fiscal year as part of the settlement allocated to the funds for this fiscal year at a value of LE 170 billion, bringing the total of what was transferred to the pension funds during the 21 months to LE 288 billion, and the total of what will be transferred by the end of June 2021, to about LE 330.5 billion.

He pointed to the improvement in financial performance, the decline in the debt ratio to the domestic product, and then the government borrowing rates, and the continuous decline in annual inflation rates, reaching 4.5 percent in March 2021, compared to an average annual inflation rate of 7.1 percent in 2019, and 12 percent in 2018, and 22 percent in 2017.

“The prices of many food commodities stabilized and decreased, so that the annual inflation rate for food commodities decreased for the first time in years by about 0.3 percent during the period January-March 2021.”

The followed monetary policy, with the support of the Ministry of Finance, by reducing the proportion of financing needs and borrowing rates, contributed to pushing interest rates on government borrowing to decrease to an average of 14 percent at the present time on bills and bonds, he stated, clarifying that this reduction in interest rates will help and contribute to reducing the burden of debt servicing and will create additional financial space for the budget that allows for continued increase in sufficient allocations to finance programs to support economic activity, especially for the sectors and groups affected by the Corona pandemic, as well as the continuation of work to diversify and increase the financing of human and social development programs and improve infrastructure and basic services Basic provided to citizens.

He continued: "The balance of foreign exchange reserves reached $40.3 billion at the end of March 2021, compared to $40.2 billion in February 2021, which is sufficient and reassuring balance that covers more than 7 months of the Egyptian import bill of goods and services."

Maait explained that the state's general budget aims in detail to preserve and work to maintain the sustainability of financial discipline, government debt and balanced financial stability in light of the repercussions of the Corona pandemic and to support and stimulate economic activity without prejudice to the sustainability of the budget and debt indicators, so it aims to achieve an economic growth rate of 5.4 percent, reduce the total deficit to about 6.7 percent of GDP, and achieve a primary surplus of 1.5 percent of GDP to ensure a return to the downward trend in the path of budgetary debt as a percentage of GDP, starting from the fiscal year 2023/2022.)

He added that the budget also aims to continue to support the productive sectors, especially industrial and export activities, push social protection efforts, and support the groups most affected by the Coronavirus pandemic, in conjunction with continuing efforts to improve the quality of the infrastructure and ensure that the widest segment of society benefits from improving services and the quality of facilities, as well as targeting Supporting specific initiatives and procedures that work to enhance the fields of human development, especially the health and education sectors.

He continued: "The budget also aims to support some national projects, such as raising the efficiency and improving all services and infrastructure in the Egyptian villages, which is considered one of the most important developmental and ambitious projects undertaken by the Egyptian government and which the political leadership, represented by President El-Sisi, attaches to the importance and priority of the speed of completion in the least time in a way that guarantees a tangible real shift in the standard of living and the quality of services for about 50 percent of the Egyptian population.

According to the minister, the budget also aims to continue the policy of proper pricing of goods and services to ensure the efficient allocation of resources and uses, and to work on expanding the preparation and follow-up of the budget on the basis of budgeting programs and performance and following up on specific initiatives with clear goals that can be measured to ensure raising the efficiency and quality of public spending, and working to expand the base Tax (increasing the percentage of tax revenues from non-sovereign entities by 0.5 percent of GDP annually) through the development of revenues, accelerating the procedures of comprehensive mechanization and encouraging the informal economy to join the official system of the state, as well as working to maximize the return from state assets by increasing the surpluses transferred to the public treasury.