Egypt's debt service ups budget deficit in first half of FY 2015/16

Ahram Online , Wednesday 2 Mar 2016

Interest payments grew 42.7 percent to reach EGP 114 billion ($14.6 billion), or four percent of GDP

Egypt's Finance Minister Hany Kadry Dimian (Reuters)

Egypt’s total budget deficit rose by 27 percent in the first half of the current fiscal year 2015/16 compared to the same period of last year, to register 5.9 percent of the country’s gross domestic product (GDP), the finance ministry's January bulletin showed Wednesday.

From July to December the budget deficit amounted to EGP 167.8 billion ($21.4 billion), as the state’s expenditures rose by 21.7 percent to register EGP 350 billion ($44.7 billion) compared to the same period a year before, mainly due to the payment of the country’s debt service.

During the abovementioned period, interest payments grew 42.7 percent to reach EGP 114 billion ($14.6 billion), or four percent of GDP

Total government debt (domestic and external) reached EGP 2.3 trillion ($294 billion) or 93.7 percent of GDP at end of June 2015, the bulletin showed.

The increase in wages and compensation of public employees also surged 8.4 percent between July and December last year to reach EGP 105.6 billion ($13.5 billion) or 3.7 percent of the GDP.

According to the finance ministry, that is considered as “the lowest rate of increase during the same period in the last three fiscal years in light of the recent reforms implemented by the ministry ... to control the increase in the wage bill.”

The state’s revenues rose to EGP 192.2 billion ($24.5 billion) or 6.8 percent of GDP in the period of the study, against EGP 163.6 billion ($20.9 billion) a year prior.

Last month, Minister of Finance Hany Kadry Dimian lowered Egypt’s economic growth forecast to a range of four to 4.25 percent for the current fiscal year ending on 30 June, down from more than five percent, attributed to the downward pressure on tourism — a vital source of foreign currency — following the bombing a Russian plane in October.

Dimian added that the lower growth rates contribute to a higher budget deficit target, seen now at 11 to 11.5 percent of GDP, up from 8.9 percent.

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