Egypt to see higher rise in budget deficit than previously expected: Deputy finance minister

Egypt’s fiscal year 2017/18 budget deficit is expected to record 9.4 percent of GDP, up from a projected 9.1 percent in the budget for the current fiscal year, Deputy Minister of Finance Mohamed Maait told Reuters on Tuesday.

Egypt’s budget deficit for fiscal year 2016/17, which ended last June, fell to 10.9 percent of GDP, down from 12.5 percent of GDP the previous year.

The expected increase comes on the back of high interest rates and an increase in global oil prices.

Brent crude recorded $69.18 per barrel on Tuesday, according to Bloomberg.

The Central Bank of Egypt (CBE) raised interest rates by 700 basis points since the November 2016 floating of the EGP, and has kept interest rates unchanged since July 2017.

In July 2017, the CBE raised the overnight deposit rate to 18.75 percent from 16.75 percent and the overnight lending rate to 19.75 percent from 17.75 percent.

The CBE is set to hold its next monetary policy committee meeting on 15 February to decide on interest rates.

The World Bank said in a report last October it expects Egypt’s budget deficit to ease to 8.8 percent of GDP in the 2017/18 fiscal year, driven by an increase in tax revenues as well as fuel subsidy reforms.

Egypt’s tax revenues increased by 62 percent year-on-year to EGP 249 billion in the first half of fiscal year 2017/18, the Finance Ministry announced earlier this month.

Egypt’s primary budget deficit hit a 10-year low in H1 2017/18, falling to 0.3 percent of GDP, down from 1.1 percent of GDP in the same period last year, the Finance Ministry announced earlier this month.