Egypt's joining of JP Morgan contributes to reducing cost of gov't debt: Standard & Poor's

CAIRO – 26 October 2021: Standard & Poor's Global Ratings (S&P) expected that Egypt's accession to the J.P. Morgan government bond index for emerging markets by the end of next January will support pumping new additional investments into the government stock market, Deputy Minister of Finance for Financial Policies and Institutional Development Ahmed Kojak stated Tuesday.

Kojak added, in a statement, that the agency expected that Egypt’s accession to the index would contribute to achieving one of the Egyptian government’s debt management strategy objectives, which is to reduce the cost of financing, in addition to activating the stock market to increase its levels of liquidity, and enhance the demand for government debt instruments, which would reduce its cost through the decline in the return required by investors.

He explained that Standard & Poor's experts expected the government's ability to continue efforts to reduce the budget deficit during the fiscal year 2021-2022 to reach 6.8 percent of the GDP, while continuing to achieve a primary surplus of about 1.5 percent of GDP.

Kojak noted that the S&P report reviewed the most important measures taken by the government to maintain the financial goals of rationalizing spending to increase funding for increased allocations to the health and education sectors and to social protection programs such as the "Takaful and Karama" program, which allows cash transfers to the neediest groups.

Finance Minister Deputy also stressed that the government's commitment to continuing the pace of economic and financial reform in balance with boosting the rates of economic activity and growth came as a result of implementing a package of stimulus and preventive measures, which amounted to 2 percent of GDP to support the various economic sectors and the most favored groups.

"This balanced fiscal policy contributed to enhancing the Egyptian economy's ability to achieve strong financial indicators represented in achieving a primary surplus of 1.45 percent of GDP during 2020/2021, which is one of the largest ratios of primary balance surpluses achieved by emerging countries during the previous year,” he said.

Kojak noted that the Ministry of Finance succeeded in managing the budget and working to reduce the total budget deficit to about 7.4 percent of GDP, compared to a total deficit of 8 percent of GDP in the fiscal year 2019/2020.

He added that the implemented financial reform measures aimed at expanding the tax base and expanding mechanization procedures to improve and simplify the services provided to financiers and reduce tax evasion and avoidance have contributed to improving and increasing the tax proceeds in a strong and balanced manner while achieving an impetus for economic activity.

Kojak explained that the implemented financial reforms and policies have contributed to achieving a gradual reduction in the debt service bill to reach 8.8 percent of GDP, down from 10 percent of GDP in 2018-2019.

The Ministry of Finance’s efforts also succeeded in extending the life of the debt and maintaining a downward trend in investment returns in government securities, which contributed to reducing the total financing needs of the budget and its organs, as well as the cost of servicing the government debt during the past years, according to the Deputy Finance Minister.