Egypt targets growth rate of 5.4%, deficit reduction to 6.7% in 21/22

CAIRO – 18 October 2021: Finance Minister Mohamed Maait said that the government aims during the current fiscal year to achieve a primary surplus of 1.5 percent of GDP, reduce the total deficit to 6.7 percent, and reach growth rates of 5.4 percent.

The minister explained that Egypt seeks to sustain the downward path of debt rates to GDP by adopting the implementation of a public debt management strategy based on diversifying sources of financing and issuing “dollar” bonds, “Eurobond” bonds, “green” bonds, and “sustainable development” bonds and sukuk.

In his meeting with representatives of the Bank of America Symposium on the sidelines of the fall meetings of the Bank and the International Fund, the minister added that the government is adopting, during the current fiscal year’s budget, a rational fiscal policy based on achieving a balance between financial stability and support for economic activities based on manufacturing and export, and support for the social protection network, and investing in the human element by improving the quality of health and education services.

He pointed out that about LE 109 billion were allocated to spending on the health sector, LE 358 billion pounds to finance government investments, national projects and infrastructure, LE 80 billion to develop Egyptian rural villages, and LE 19 billion to finance the "Takaful and Karama" program.

The minister pointed out that the Egyptian economy has won many international acclaim as a result of the positive improvement in financial indicators, and its flexibility in dealing with internal and external crises, despite the repercussions of the “pandemic” that cast a shadow on many economies of the world, as Egypt was able to achieve a growth rate during the last fiscal year of 3.3 percent of GDP, recording a primary surplus of 1.45 percent, and reducing the total budget deficit to about 7.4 percent.

Maait explained that the government aims to sustain the downward path of debt rates to GDP by adopting the implementation of a public debt management strategy based on diversifying sources of financing and issuing “dollar” bonds, “Eurobonds” and “green” bonds, sukuk and “sustainable development” bonds, extending the life of the debt and reducing the cost of financing, as the debt rate reached about 91 percent at the end of the last fiscal year.

“We aim to reduce the debt rate to less than 90 percent during the current fiscal year, less than what is recorded in some European countries despite the repercussions of the pandemic,” he added.

The government seeks to reduce the ratio of debt service to GDP to record 8.1 percent during the current fiscal year, compared to 8.8 percent during the last fiscal year, and we aim to extend the average debt life to 3.7 years compared to 3 years during the last fiscal year.

Maait said that we are keen to continue the "development and machinery" operations that the various sectors of the ministry are witnessing to modernize the state's public financial management systems and enhance the governance of the expenditure and revenue system, in a way that contributes to raising the efficiency of tax collection, expanding the tax base, improving public spending and maximizing the use of state resources. Through the implementation of the medium-term revenue strategy, we aim to increase tax revenues by 2 percent of GDP within four years, noting that “digitization” projects have led to an increase in income tax revenue by 11 percent and value-added tax proceeds by 47 percent.

The minister pointed out that the proactive package taken by the state to support the sectors and groups most affected by the negative repercussions of the “Corona” pandemic amounted to about 2 percent of the gross domestic product, with a value of LE 100 billion, and about 64 percent of it was spent to support the sectors of industry, export, tourism and social protection programs.

He explained that the International Monetary Fund praised Egypt as one of the best countries in the efficiency and effectiveness of spending the economic support package and taking into account the urgent priorities of the health sector.