Egypt’s budget deficit is expected to narrow to 6.7% of GDP in FY21/22

The budget deficit is expected to narrow to 6.7 percent of GDP, from an expected 7.7 percent in the current fiscal year, before falling to 6.2 percent in FY 2022-2023, according to The Ministry of Finance.

The ministry expects the country’s primary surplus to increase to 1.5 percent in FY2021-2022 from 0.9 percent this year, before falling to 1.3 percent the year after.

The Finance Ministry released yesterday its draft FY2021-2022 budget, which is under discussion at the House of Representatives after earning cabinet sign-off last month.

Main highlights of the budget draft:

On the other hand, the state’s financing gap is expected to increase 7.1 percent to 1.06 trillion Egyptian pounds, with the bulk of the gap, (nearly 990 billion pounds) to be plugged through local treasury sales. The remainder will come from 66 billion pounds in eurobonds and another 123.8 billion pounds in loans from foreign institutions.

Government spending to rise 14 percent next year: The ministry expects the government to spend 1.84 trillion pounds in FY 2021-2022, up 14 percent  from its 1.61 trillion pounds projected spend this year.

But revenue growth to outpace rise in spending: Revenues are forecast to rise 22 percent  to reach 1.36 trillion pounds during the year. This will be driven by an 18 percengt rise in tax collection, which will bring in 983 billlion pounds compared to an expected  830 billion pounds in the current fiscal year. Income from other sources will rise 33 percent to 380 billion pounds.

Debt service will account for almost a third of government spending, with payments remaining the largest single spending item in the budget, rising more than 2 percent  to  579 billion pounds.

Health and education will see the largest spending increases: Spend on healthcare will rise 16 percent to 108.8 billion pounds while education will receive 172.6 billion pounds, up almost 10 percent on FY 2020-2021.