Egypt Adjusts Budget as Blurry Outlook Overshadows Economy

In a statement issued today, Monday, Finance Minister Mohamed Maait indicated that the budget 2020/21 was prepared during Nov. 2019-Feb. 2020, however, these assumptions will be updated once  coronavirus repercussions start to clear up.

Maait issued the introductory statement to the next year’s budget, amid a conservative view of the economy’s performance.

At the end of March, the Egyptian Cabinet approved the new fiscal year budget project, which aims to reduce the total deficit to 6.3 % of gross domestic product (GDP) and achieve an initial surplus, in addition to supporting and stimulating the economic activity.

It is noteworthy that the Egyptian government said at the end of last March that it had to adjust the public budget for the next fiscal year, in line with the current situation.

The  budget for the FY 2020/21 also aims to reduce the public debt ratio as a percentage of GDP to 82.7%  by the end of June 2021, which requires a surplus of 2% of domestic product.

Maait added that the pre-budget statement reflects the latest trends of the country's fiscal policies for the next year, the most important reform measures, priorities of public spending, the optimization of resources and social programs, and a fair distribution of capital to support economic activity and structural reform.

The Egyptian government has lowered the targeted growth rate for the current fiscal year from 5.6% to 5.1 % in the best case scenario, with the third and fourth quarters slowing to 5.2% and 4%, respectively.

The government also reduced the targeted growth rate for the next fiscal year from 6% to 4.5 % if the coronavirus outbreak ends at the fourth quarter of the current fiscal year, nevertheless the impact is expected to extend until H1 FY 2020/21.

However, if the outbreak of the COVID-19 persists in the middle of the next fiscal year, the government will reduce the target growth rate to 3.5%.

The current fiscal year budget project focuses on bringing about structural reform that paves the road toward a leadership of the private sector to drive economic growth, ensuring an increase in employment opportunities, especially for young people, and fair access to development opportunities to improve inpidual incomes by supporting small and medium sized enterprises (SMEs), as well as improving the public services for citizens in all governorates.

The budget also focuses on education, health care programs as well as research and development (R&D), which contributes to improving living standards and an enhancement to economic activity.

Meantime, the draft budget still presumes the average price of a barrel of oil at $ 61, guided by the expectations of the International Monetary Fund (IMF) and a large number of international financial institutions prepared and published in January 2020.

The budget will be updated after the clarity of vision during the coming period, and in light of the world oil prices falling significantly in March 2020.

Maait added that the Ministry is closely following the international oil markets in light of the latest developments that occurred after the OPEC meeting in the second week of March, which caused many fluctuations in world oil prices.