CAIRO: Egypt’s President Abdel Fattah al-Sisi ratified Thursday the state budget for fiscal year (FY) 2015/2016, after being revised to slash the projected deficit to 8.9 percent of GDP, according to a presidential statement.
Egypt’s Cabinet approved on Wednesday the final draft budget after Finance Ministry amended an earlier draft issued June 18, which forecasted the deficit at 9.9 percent of GDP.
Global credit rating agency, Moody’s Investors, criticized the previous draft budget last week, saying it hints at a slower fiscal consolidation pace, which is “credit negative.”
“President Sisi ratified the state budget for FY 2015/2016, approved by the Cabinet, after applying some amendments to slash the shortfall, rationalize public expenditure without harming programs of the low-income and the needy,” Presidency Spokesman Ambassador Alaa Youssef said in the statement.
In the new state budget, total expenditure is projected to soar by 27.7 percent from the previous FY to 868 billion EGP. Yet it is lower than an estimated 885 billion EGP in the previous draft. Public wages are forecasted to reach at 218 billion EGP.
Meanwhile, total public revenues are projected to hit 622.2 billion EGP, from 612 billion EGP in the previous draft, and around 17.4 percent up from FY 2014/2015.
“Expenditure on social programs is projected to amount to 429 billion EGP, nearly 50 percent of total public expenditure and an 11.8 percent up from FY 2014/2015,” according to a Finance Ministry statement.
Economic growth was projected at about five percent, compared to a projected 4.2 percent during FY 2014/2015, and an average of two percent over the past three year.
Egypt has allocated 61 billion EGP ($8 billion) for fuel subsidies in the new budget, with an estimated price for Brent at $70 per barrel, according to the budget statement posted on the Finance Ministry’s website.
“Oil subsidies amounted to 70 billion EGP during FY 2014/2015, down from an estimated 100 billion EGP in the state budget,” chairman of State-run Egyptian General Petroleum Corp (EGPC,) Tarek el-Molla said in statement.
The government had earlier attributed the decline estimated at 30 billion EGP to a sharp slip in global oil prices in the second half of the current fiscal year.
Five- Year macroeconomic plan to cut deficit at 8%
Egypt has adopted a five-year macroeconomic plan aimed to reduce the budget gap to (8- 8.5 percent) by 2018/2019, by applying subsidy and tax reforms.
The Finance Ministry expects the deficit to reach 10.8 percent in FY 2014/2015 (ended June 30.)
In April, the International Monetary Fund (IMF) upgraded its forecast for Egypt’s economic growth in 2015 to 4 percent, from 3.8 percent in its previous assessment.
“Egypt’s macroeconomic stabilization plans and wide-ranging structural reforms are expected to increase confidence, and growth is expected to rise to 4 percent this year,” the IMF said in its April World Economic Outlook (WEO.)
The fund forecasts Egypt’s economy to grow by 4.3 percent in 2016, noting that lower oil prices will reduce Egypt’s vulnerabilities as a main oil importer in the Middle East.