Back to the complete issue
Thursday, 19 April 2018

How the economic reforms will help rein in debt

Egypt’s fiscal reforms in general, and ongoing subsidy cuts in particular, will help keep rising debt from getting out of control, Finance Minister Amr El Garhy tells the Financial Times’ Heba Saleh in an interview on Wednesday. “The reduction in the overall deficit will be accompanied by a primary surplus of 2% of GDP, which means that, excluding interest payments, government revenues will be higher than its expenditure,” he said. “This surplus will help us in settling part of our debt service or the debt itself, even if it is a small amount…It will help us reduce our addiction to debt,” El Garhy added. The government is planning to slash fuel subsidies 19.1% to EGP 89.08 bn and electricity subsidies 46.6% to EGP 16 bn next fiscal year.

EFG Hermes’ Mohamed Abu Basha agrees that the primary surplus is “a very important structural improvement,” and the first of its kind in “two or three decades. … It means that, structurally, the country is not creating new deficits, and this is good for inflation and debt dynamics, which is primarily why we’ll see debt-to-GDP ratios falling relatively quickly.”

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

Enterprise is available without charge thanks to the generous support of EFG Hermes (tax ID: 200-178-385), the leading financial services corporation in frontier emerging markets; SODIC (tax ID: 212-168-002), a leading Egyptian real estate developer; SomaBay (tax ID: 204-903-300), our Red Sea holiday partner; Infinity (tax ID: 474-939-359), the ultimate way to power cities, industries, and homes directly from nature right here in Egypt; CIRA (tax ID: 200-069-608), the leading providers of K-12 and higher level education in Egypt; Orascom Construction (tax ID: 229-988-806), the leading construction and engineering company building infrastructure in Egypt and abroad; Moharram & Partners (tax ID: 616-112-459), the leading public policy and government affairs partner; Palm Hills Developments (tax ID: 432-737-014), a leading developer of commercial and residential properties; Etisalat Misr (tax ID: 235-071-579), the leading telecoms provider in Egypt; and Industrial Development Group (IDG) (tax ID:266-965-253), the leading builder of industrial parks in Egypt.