A file photo of the Egyptian Ministry of Finance's headquarters in Cairo's Nasr City district. (Photo: Ahram)
The highlights and targets of the new budget are based on the draft budget announced this week by the ministers of planning and finance, taking into account that the government has not revealed all the figures of the current budget of FY 2021/22.
It is worth noting that the upcoming fiscal year comes amid a host of crises, including the impact of the Ukraine-Russia conflict, global inflationary wave, rising food and energy prices, and repercussions of the coronavirus pandemic.
Q: What is the government's plan for real GDP growth in FY 2022/23?
A: As a result of the Ukrainian-Russian conflict, the government lowered its projections for the country’s real GDP growth to 5.5 percent, down from 5.7 percent expected previously. The real GDP growth is projected to hit 6.4 percent by the end of FY 2021/22 thanks to the country’s gradual economic recovery from the pandemic.
Q: What are the government's targets in terms of budget revenues in FY 2022/23?
A: The government plans to attain EGP 1.5 trillion, while the expected expenses are projected at EGP 2.7 trillion. In January, prior to the Ukraine war, the government announced that it targets to increase the budget’s revenues by between 13 percent and 15 percent.
According to Statista, budget revenues increased to around EGP 1.3 trillion, up from EGP 1.2 trillion in FY 2020/21, with a positive trend attained since FY 2016/17.
Q: What are the key procedures the government will adopt to attain this rate?
A: The government increased the investment value to unprecedented EGP 1.4 trillion, up from EGP 1.2 trillion expected in FY2020/21, with a growth of 17 percent. The government also sets to raise tax revenues by 23.5 percent in FY 2022/23 through accelerating the plan of merging informal economic activities into the formal economy and expanding in technology solutions adoption, especially in tax and customs collection.
Moreover, the government targets an EGP 6 billion in revenues from resuming its initial public offering programme (IPO).
In addition, the government plans to increase VAT revenues by 22.6 percent to register EGP 477.6 billion. Real-estate tax revenues are expected to rise to EGP 7.7 billion, up from EGP 5.7 billion in FY 2021/22.
Q: What is the target in terms of the budget’s primary surplus and deficit?
A: The government eyes raising the primary surplus to 1.5 percent of GDP to reach EGP 132 billion and reducing the budget deficit to 6.1 percent of GDP. In FY 2021/22, the primary surplus posted 1.4 percent of GDP, which helped reduce the budget deficit to 7.4 percent of GDP, according to the finance ministry.
Q: How does the government plan to address the elevating inflation rates amid the ongoing crisis?
A: The FY 2022/23 draft budget expects the inflation rate in Egypt to average nine percent, which is the same target the Central Bank of Egypt (CBE) set through the end of 2022, yet inflation in urban areas accelerated in April to 13.1 percent, up from 12.1 percent in March.
To deal with this challenge, the government raised the allocations for social protection and support to EGP 306 billion. The FY 2022/23 budget includes an increase in wages and compensations of EGP 43 billion and a rise in pension allocations by 13 percent compared to the current FY 2021/22.
It also includes an uptick in the allocations for supply commodity subsidies to reach EGP 90 billion, up from EGP 87.2 billion. The government plans to raise the executed total investments to EGP 1.4 trillion in FY 2022/23, a growth rate of 17 percent compared to FY 2021/22.
Q: How does the new budget address the issue of elevating debt level?
A: According to the International Monetary Fund (IMF), Egypt’s overall debt to GDP ratio is projected to hit 94 percent in 2022 due to the pressure of rising global inflation and the impact of the Ukraine war.
The FY 2022/23 draft budget does not include a clear target for the debt level during the fiscal year, yet it pointed out that the government considers to put the debt on a downturn path over the coming four years to reach 75 percent of GDP by FY 2025/26, with an objective of lowering debt services to 7.6 percent of GDP and 33.3 percent of the budget’s expenditures together with diversifying the debt finance instruments and resources and prolonging its maturity.
Egypt is currently in discussions with the IMF to secure a loan under the extended fund facility (EFF) instrument. Economic analysts expect it to average $10 billion.
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