Egypt 2012/13 budget shows 12.5 pct rise in deficit

Egypt’s budget deficit will rise 12.5 percent to 135.0 billion Egyptian pounds ($22.26 billion) in the fiscal year that began on July 1, a draft budget issued on Sunday, though the government is already struggling to find funding for the shortfall.

Egypt’s borrowing costs have soared since the overthrow of President Hosni Mubarak in a street revolt last year, which sent the economy into a tailspin and left local banks taking almost the entire burden of lending to the state.

The outgoing army-backed government has tried to rein in the deficit by cutting energy subsidies for industry but new Islamist President Mohamed Morsi needs to secure emergency funds from abroad to head off a budget and balance of payments crisis.

For now, three weeks into office, he is still trying to put in place his own cabinet and there is scant sign of progress.

Total expenditure will climb to 533.8 billion pounds this year from 476.3 billion in 2011/12, the ministry said in the draft budget, posted on its website on Sunday.

A quarter of that would go to pay the interest on debt, which will rise 26 percent to 133.6 billion pounds. Subsidies on basic foodstuffs will grow by 41 percent but overall subsidies fall 15 percent because of lower outgoings on fuel.

The budget deficit represents 7.9 percent of projected gross domestic product (GDP), down from 8.2 percent a year earlier, said the ministry. The estimate implies GDP growth of 4-4.5 percent, substantially above the level forecast by economists.

Reuters