Moody’s: Egypt’s 2019/20 budget is credit positive

By aya salah On Apr 6, 2019

Egypt’s budget for fiscal year 2019/2020 points to continued fiscal consolidation, it is described as credit positive, according to Moody’s Rating Agency.

According to the recent news published by domestic media, Moody’s expected Egypt to achieve a growth rate of 5.8 percent in 2019/2020.

It also forecasted a fiscal deficit and a primary surplus of 7.5 percent, and 1.7 percent of gross domestic product (GDP), respectively.

The report attributed the reduction of the deficit to a reduction in expenditures, and in particular involves the share of subsidies, grants, and social benefits.

“We project a decline to 5.4 percent of the GDP in FY 2019/20, from an expected 6 percent in FY 2018/19.” the report read.

It further foresaw that Egypt’s general government debt/GDP ratio would reduce to 82.3 percent in FY 2019/20, from an expected 86.3 percent in FY 2018/19, and an actual of 92.6 percent in fiscal FY 2017/18.

Moreover, the report said that petroleum spending will reach an estimated 0.7 percent of the GDP from 1.7 percent in FY 2018/19, following the completion of fuel subsidy reform by the coming June. It added that the continued reduction in electricity subsidies will create some fiscal space to expand spending for targeted income transfers and social welfare payments, including an increase in pension transfers to 1.3 percent of the GDP from 1.2 percent in FY 2018/19.

Egypt’s 2019/2020 preliminary budget stated that gross domestic product is expected to hit about LE 6.163 trillion in 2019/2020 budget, compared to the expected LE 5.256 trillion of the current fiscal year.

The budget deficit is anticipated to hit 7.2 percent of GDP, down from 8.4 percent of 2018/2019, announcing that the government will allow new borrowing of LE 445.1 billion in the next fiscal year.

The 2019/2020 budget aims to increase growth rates to 6 percent, focusing on comprehensive inclusive growth. The government is also seeking to create jobs for youth and reduce unemployment rates to 9.1 percent.