Egypt’s tax revenues possibly below draft budget estimate: Moody’s
Moody’s Investors Service

CAIRO: Moody’s Investors Service, a global credit rating agency and provider of financial analyses, said it expects Egypt’s tax revenues to be lower than 612 billion EGP projected in the draft budget for fiscal year 2015/2016.

Egypt’s Cabinet approved the draft budget for the 2016 fiscal year earlier in June, with a fiscal deficit projected to reach 9.9 percent of GDP, down from an estimated 10.8 percent gap in the revised budget deficit of the current fiscal year.

“Although the increased social spending is part of the government’s economic and political strategy, the 26 percent projected revenue increase …will depend on a swift implementation of tax reforms. We expect that tax revenues will be lower than what the draft budget outlines,” Moody’s said in a report issued Thursday.

In the draft budget which yet awaits President Abdel Fattah al-Sisi’s ratification, expenditure on social programs which comprise direct cash support programs, health insurance, bread and food subsidy system, and education, is projected to amount to 431 billion EGP, nearly 49 percent of total public expenditure, and a 12 percent up from the current fiscal year.

The rating agency added: “Some revenue-enhancing measures have yet to be implemented: the introduction of a value-added tax has been delayed because of postponed parliamentary elections.”

Moody’s further noted that other measures have been modified or reversed, referring to the Cabinet’s recent decision to slash the top income tax rate and suspend a controversial capital gains distribution taxes on profits for two years.

The draft budget projects a 20 percent hike in spending over the current fiscal year to 885 billion EGP, with 431 billion EGP allocated for social spending, while public-sector wages and salaries, which constitute 26 percent of total expenditures are projected to grow by 14 percent in FY 2016.

Spending on public investment is hiked by 66 percent in the draft budget to 75 billion EGP, only 8.5 percent of total spending and just 9 percent of the overall spending.

“Egypt is facing declining budgetary grants, which, according to the draft budget, will decline to 2.2 billion EGP in fiscal 2016 from 25.7 billion EGP in fiscal 2015 and 95.9 billion EGP in fiscal 2014,” Moody’s concluded.

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