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Wednesday, 12 May 2021

Egypt’s government gross debt projected to jump to 92.9% of GDP in 2021, net debt to rise to 83.2%: IMF

Egypt’s government's gross debt reached its highest in 2017 to post 103 percent of GDP, but it started to decline as of 2018, reaching 92.5 percent and 84.2 percent in 2019 before increasing in 2020 as a result of the pandemic

Doaa A.Moneim , Wednesday 7 Apr 2021
IMF
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The Egyptian government’s gross debt is projected to hike up to 92.9 percent of GDP in 2021, up from 90.2 percent in 2020, but to decline to 88.9 percent in 2022 and down to 73.4 percent by 2026, according to the International Monetary Fund (IMF).

The figures came within the IMF’s fiscal monitor report, released on Wednesday, amid the IMF and the World Bank’s spring meetings, that kicked off on Monday.

According to the report, Egypt’s government’s gross debt to GDP ratio reached its highest in 2017 to post 103 percent, but it started to decline as of 2018, reaching 92.5 percent and 84.2 percent in 2019 before increasing in 2020 as a result of the pandemic’s economic repercussions.

Graph(1)

Meanwhile, Egypt’s general government net debt is expected to increase to 83.2 percent of GDP in 2021, up from 79.5 percent in 2020, and to decline again to reach 81 percent in 2022, reaching 66.7 percent by 2026.

On the other hand, Egypt’s general government’s overall balance is expected to see a slight improvement, reaching 7.3 percent of GDP in 2021, up from -7.9 percent and -8 percent in 2020 and 2019 respectively, and it is projected to reach -5.8 percent by 2022 and up to -4.2 percent by 2026, according to the report.

Egypt’s government’s primary balance is projected to drop to 1 percent of GDP in 2021, down from 1.3 percent in 2020, before rebounding to 2.2 percent in 2022, according to the report.

However, the report expected it to fall again by 2026 to reach 1.8 percent of GDP.

Graph(2)

Meanwhile, the report expected Egypt’s general government’s cyclically adjusted balance to decline to reach -7.9 percent of GDP in 2021, down from -7 percent in 2020, before notably improving to –6.2 percent in 2022 up to -4.3 percent by 2026.

General government revenue of the GDP is projected to increase to 20.6 percent in 2021, up from 19.3 percent in 2020, and to continue its rise to reach 21 percent in 2022, up to 21.7 percent by 2026, according to the report.

At the same time, the report said that Egypt’s general government’s expenditure is expected to rise slightly to reach 27.9 percent of GDP, up from 27.2 percent in 2020, but to run its downturn path as of 2023 to reach 26.8 percent, reaching 25.9 percent by 2026.

For Egypt’s gross financing needs, the report expected it to amount to 36.9 percent of GDP.

It also projected Egypt’s interest rate to drop by -2.8 percent in six years, from 2021 through 2026.

“The race to vaccinate against COVID-19 continues, but the pace of inoculations is widely different across countries, with access unavailable for many. Global vaccination is urgently needed. Global inoculation would pay for itself with stronger employment and economic activity, leading to increased tax revenues and sizable savings in fiscal support,” said the report.

Accordingly, fiscal policy must remain flexible and supportive of health care systems, households, viable firms, and economic recovery until the pandemic is brought under control globally, according to the report.

Graph(3)

For emerging markets, the report said that fiscal support in such economies has been smaller and front-loaded compared to advanced economies, with a large share of measures expiring.

Moreover, fiscal support has prevented more shares from economic contractions and larger job losses.

On the other hand, such support, along with drops in revenues, has raised government deficits and debt to unprecedented levels across all country income groups.

Consequently, average overall deficits as a share of GDP reached 11.7 percent for advanced economies, 9.8 percent for emerging market economies, and 5.5 percent for low-income developing countries in 2020.

The report also attributed these levels in emerging markets and most low-income developing countries to the collapse in revenues caused by the economic downturn.

Fiscal deficits in 2021 are projected to shrink in most countries, as pandemic-related support measures expire or wind down. Revenues will recover somewhat, and the number of unemployment claims will decline, according to the report.

While average public debt to GDP ratio reached an unprecedented 97 percent in 2020 globally, the report projected it to stabilise at around 99 percent in 2021.

Also, despite higher debt, average interest payments are generally lower in advanced economies and many emerging markets owing to the trending decline in market interest rates, according to the report.

“Over the medium term, fiscal deficits are projected to shrink in all income groups, as recoveries increase pace and fiscal adjustments resume. As a result, the debt-to-GDP ratios in most countries are projected to stabilize or decline, although public debt will continue to increase in a few countries because of factors such as aging and development needs”, the report projected. 

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