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Thursday, 29 October 2020

Egypt’s government gross debt to jump to 90.6% of GDP amid the COVID-19 crisis: IMF

The ratio is expected to start declining as of 2022 to reach 87.8 percent, reaching 77 percent in 2025, according to the report

Doaa A.Moneim , Wednesday 14 Oct 2020
IMF
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Egypt’s general government's gross debt to GDP ratio is expected to increase to 86.6 percent in 2020, up from 83.8 percent in 2019, with projections to jump to 90.6 percent in 2021, the highest since the onset of the pandemic, according to the International Monetary Fund’s fiscal monitor report released on Tuesday.

The ratio is expected to start declining as of 2022 to reach 87.8 percent, reaching 77 percent in 2025, according to the report.

The country’s net debt to GDP ratio is also expected to increase to 78 percent in 2020, up from 74.4 percent in 2019, and is projected to jump to 82.7 percent in 2021; it is expected to start declining as of 2022 to reach 74.8 percent in 2025, according to the report.

Egypt’s deficit relative to GDP is projected to remain broadly flat, as it has faced annual gross financing requirements exceeding 35 percent of GDP, which has likely constrained its fiscal response to the pandemic, as the report expected.

Egypt’s general government's overall balance, as an emerging market and middle-income country, to GDP ratio is projected to decline -7.5 percent in 2020, -8.1 percent in 2021, -5.2 percent in 2022. -4.4 percent in 2023, -4 percent in 2024 and -3.8 percent in 2025, according to the report.

Egypt also is expected to see a decline in general government revenues to GDP ratio in 2020 to reach 19.2 percent, down from 20.1 percent in 2019, with projections of rebounding to 20 percent in 2021, up to 21.4 percent in 2025, according to the report.

Globally, government deficits are set to surge by an average of 9 percent of GDP, while global public debt is projected to approach 100 percent of GDP, a record high, as a result of the ongoing COVID-19 crisis, according to the report .

The COVID-19 pandemic and its related lockdowns have prompted unprecedented fiscal actions to contain its impacts, which amounted to $11.7 trillion, close to 12 percent of global GDP, as of 11 September 2020, the report unveiled.

Half of the fiscal actions consisted of additional spending or forgone revenue, including temporary tax cuts, liquidity support, loans, guarantees, and capital injections by the public sector that helped save lives, supported vulnerable people and firms, and mitigated the fallout on economic activity, according to the report.

Based on the projected fall in per capita incomes, the report estimated 100 million up to 110 million people globally are expected to enter extreme poverty, reversing the decades-long declining trend.

Additional social assistance, especially aid that supports the poor directly and cushions the recession, is critical to have a modest impact on the poor, as the report expected an increase in poverty from 80 million to 90 million people.

For emerging markets and middle-income economies , the report projected the overall fiscal deficit to widen by about 6 percent of GDP in 2020 compared to 2019, almost half as large as the increase in advanced economies.

Amid the crisis, euro bond issuance by emerging markets soared to $140 billion in the first half of 2020, up from $95 billion in 2019, according to the report.

The report also expects most emerging markets and middle-income economies will emerge from the pandemic with higher debt vulnerabilities.

The headline deficit in low-income developing countries is projected to widen by more than 2 percentage points of GDP in 2020 compared with 2019, according to the report.

The report asserted the urgency of public investment in sectors critical to controlling the pandemic, especially in health care, schools, digital infrastructure, safe buildings, and safe transportation.

In addition, public investment should play an important role in fiscal packages allocated for the recovery, which is expected to create millions of jobs directly in the short term and many additional jobs indirectly in the longer term, according to the report.

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