Egypt Stimulus Plan Won’t Compromise Budget Gap, Minister Says

Egypt’s interim government will complete payments of long-due debts to contractors and restart stalled building projects, as it seeks to revive the economy amid political unrest that has killed dozens this month, Planning Minister Ashraf El-Arabi said.

The measures won’t widen the budget deficit, El-Arabi said in a telephone interview yesterday. The government may increase public spending in the second half of the fiscal year that ends in June 2014, he said.

The interim government took power after the July 3 ouster of President Mohamed Morsi, which triggered weeks of protests that have left more than 100 people dead, mostly his Islamist supporters. The cabinet inherits an economy stuck in the worst slowdown in two decades, and the biggest budget deficit in the Middle East relative to output.

“There is no contradiction between the goal of addressing the budget deficit and stimulating the economy,” said El-Arabi, who also served under Morsi. “One priority is to pay back what’s due to contractors, and this in itself can be a stimulus. The budget deficit is also very important and is being discussed in detail.”

Growth may slow to 2 percent in 2013, near the lowest level since 1992, according to the International Monetary Fund. The budget deficit may widen to 12 percent of economic output, according to the median estimate of 11 analysts surveyed by Bloomberg.

Morsi’s government, in power for a year, repaid contractors 3.8 billion Egyptian pounds ($543 million) as of June 30 and the interim government is reviewing how much remains due, in order to schedule payments, El-Arabi said.

The government also plans to reallocate existing resources to revive public projects “that have stalled after being 75 percent or 80 percent completed,” he said.

Source:Bloomberg