Interest payments are a “considerable drag on government finances,” but BMI seesborrowing costs easing as Ismail government slashes deficit. BMI sees the reform program driving down borrowing costs, but isn’t certain that the Ismail government will achieve its deficit reduction targets, saying growth of 3.6% in FY2017-18 will result in a budget deficit equivalent to 9.9% of GDP against projections of 4.6% growth and a deficit of 9.1% in the budget document. BMI’s June 2017 Africa Monitor. Either way, it writes, this “would indicate the start of a fiscal readjustment in Egypt which will reduce its budget deficit, minimise the climb in debt levels, and lower its cost of borrowing on international capital markets.” Subsidy cuts are key to cutting the deficit, BMI writes, noting that subsidies counted for 17% of all state spending in 2015-16. BMI has also picked up on the notion that interest rates in their current band are choking the state treasury: “At 35.0% of spending in H1, interest payments present a considerable drag on government finances (by contrast, capital expenditure spending was just 7% in 2015/16).”