In July, Egypt’s FY2021/2022 budget will be rolled out with a total value of EGP 2.6 trillion, the biggest in Egypt’s history, increasing from a value of EGP 2.2 trillion for the current FY2020/2021 budget that ends in June.
The FY2021/22 budget was drafted amid expectations that Egypt would restore its pre-pandemic growth and macroeconomic performance levels after the notable slowdown the country’s economy is witnessing during the current FY2020/21.
Hereunder the key highlights of Egypt’s biggest FY2021/22 budget and its main targets.
Q: What is the expected real GDP growth in the FY2021/22 draft budget?
A: FY2021/22 is expected to witness an increase in real GDP growth to reach 5.4 percent, after experiencing a slowdown in FY2020/21 estimated at 2.8 percent, in light of the incremental recovery of Egypt’s economy recovery from the COVID-19 pandemic and its associated harsh impacts.
Q: What kind of procedures is the government expecting to take to reach such levels?
A: The government is targeting the implementation of new policies that aim to catalyse economic and productive activities that back real GDP growth, especially in manufacturing and export sectors.
It is also targeting increasing the total investments in FY2021/22 to record EGP 358 billion.
The FY2021/22 draft budget targets curbing budget deficit as well as reaching 89.0 percent of GDP, down from an estimated deficit of 89.8 percent of GDP in the current FY2020/21.
The government is also working on extending the debt repayment period to reach 4.2 years by the end of FY2021/22, up from the 3.6 years expected by the end of FY2020/21 and 1.3 years in FY2012/13.
All these procedures will be accompanied by the second phase of Egypt’s economic reform programme, that has been launched recently with a special focus on the structural reforms that unleash the private sector to be a partner in Egypt’s growth and recovery, enhance the IPO programme, and support the export, agriculture, and industry sectors.
Q: What are the FY2021/22 targets for the inflation rate?
A: The government plans to be in the range the Central Bank of Egypt (CBE) has set, through the fourth quarter of 2022, at 7 percent ±2 percentage points.
In March, Egypt’s headline annual inflation rate declined to 4.5 percent, down from 5.4 percent recorded by the end of 2020, driven by the decrease in global commodities prices, the decline in domestic demand, and local stability.
Q: What about the projected public revenues for the FY2021/22 budget amid the heavy pressure on Egypt’s spending amid the ongoing challenges?
A: For tax revenues, FY2021/22 targets increasing them by 18.3 percent. That includes EGP 297.1 billion in income tax revenues collected from non-sovereign bodies, excluding the CBE, Suez Canal, and taxes on T-bills and T-bonds proceeds.
It also includes a targeted EGP 449.6 billion of VAT, a growth of 17.2 percent compared to FY2020/21.
As for the property tax, it is projected to grow by 0.08 percent of GDP in FY2021/22 to record EGP 5.6 billion.
In terms of the customs tax, the government plans to raise it by 12.3 percent to reach EGP 42.4 billion.
It is also eying collecting EGP 380.6 billion in FY2021/22 from non-tax resources.
Q: What is the estimated total public spending in FY2021/22 amid the ongoing crisis?
A: The FY2021/22 draft budget aims to not exceed EGP 1.25 trillion, which is expected to result in an initial surplus estimated at a 1.5 percent of GDP that is expected to contribute in decreasing debt to GDP ratio.
Q: What are the expected expenses in FY2021/22 compared to FY2020/21?
A: They are projected to increase by 0.9 percent in FY2021/22 to post EGP 1.8 trillion, up from EGP 1.7 trillion in FY2020/21.
The expenses include commodities and services purchasing, wages and compensations for employees, investments, loan interests, subsidies, grants, and social benefits.
Q: What is the estimated price of oil barrels domestically in the FY2021/22 draft budget?
A: In light of the increase in global oil prices in 2021 to post $60/pb up to $65/pb, the finance ministry draws its estimations at $60/pb in FY2021/22.
Q: What are the total subsides on oil products in FY2021/22?
A: They witnessed a sharp decline by 34.7 percent in FY2021/22 to record EGP 18.4 million, down from EGP 28.1 million in FY2020/21.
Q: What is the total amount of interest due on Egypt in FY2021/22 vis-a-vis local and foreign loans it had obtained?
A: They climbed by 2.4 percent to EGP 579.5 million in FY2021/22 (8.3 percent of GDP), up from EGP 566 million in FY2020/21.