Egypt's 2019-20 budget: Setting more hopeful targets

Egypt’s parliament approved the state’s 2019-20 budget this week after the budget bill had been discussed in the parliament’s Planning and Budget Committee and put to a final vote on Monday.

The new budget aims to increase the country’s GDP by six per cent, lower the deficit to 7.2 per cent of GDP, down from the 8.4 per cent targeted this year, achieve a primary surplus of two per cent of GDP, and reduce the public debt to 89 per cent of GDP, in preparation to taking it further down to 80 per cent in 2021-22.

Increasing GDP by six per cent is possible if more foreign direct investment (FDI) flows into the country, said Radwa Al-Sweify, head of research at Pharos Holding, an investment bank. The targeted GDP is close to Pharos’s forecasts, set at 5.8 per cent, for the new fiscal year, she added.

For Alia Mamdouh, a senior economist at Beltone Financial, an investment bank, continuing on the path of constructing national mega-projects, new road networks and investing in the oil and gas sector could raise GDP to the numbers targeted by the government.

Pharos expects the deficit to reach 7.7 per cent of GDP this year, Al-Sweify said. The deficit is tied to the government’s ability to control public debt. Lowering the deficit would require increasing revenues and cutting subsidies, she added.

According to Egypt’s agreement with the International Monetary Fund (IMF), the last reform measure under the plan, related to lifting subsidies on fuel, should take place before the end of this month. This will be the third increase in fuel prices since the government signed the IMF deal in 2016.