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Sunday, 8 July 2018

Egypt achieves EGP 4 bn budget surplus for first time in 15 years

Egypt records full-year primary budget surplus for first time in 15 years in FY2017-18: Egypt achieved a primary budget surplus of EGP 4 bn in FY2017-18, its first in 15 years, according to a Finance Ministry statement. The figure translates to around 0.2% of GDP, Finance Minister Mohamed Maait told the press on Thursday, adding that the overall budget deficit is expected to have narrowed to 9.8% for the fiscal year just ended, “slightly above the 9.1% [the government] said last year it was targeting.” The Cabinet and House of Representatives had signed off last month on a EGP 70 bn overdraft for the current fiscal year to cover “necessary expenditures,” including importing fuel at higher prices than had been anticipated. Former finance Minister Amr El Garhy had said that the overdraft would not impact the target deficit for the year.

Building on the foundation set by Amr El Garhy, the Madbouly government is aiming for a primary surplus of 2% of GDP in FY2018-19, Maait added, on total revenues of around EGP 989 bn.

Although Egypt is looking to wean itself off debt in the long run, Maait suggests that foreign-denominated bond issuance was coming in FY2018-19. The ministry still needs to set the size, scope and terms of the issuance with the Cabinet before announcing anything on this, he added.

Upcoming regulatory changes: The Finance Ministry is looking at what legislative and regulatory change will have to take place before the government issues sukuks (shariah-compliant bonds), Maait also said. Maait had previously told us a sukuk offering was unlikely to be feasible this fiscal year. The ministry is also planning to institute amendments to the tax code in the coming two weeks, in time to catch what’s left of the House of Representatives’ current session, Maait said at a press conference. The change will focus on late payment of taxes and interest on overdue fees, Tax Authority boss Emad Samy reportedly said at the same conference.

A faint signal that reform of the public service may be in the works? President Abdel Fattah El Sisi directed the Finance Ministry last week to begin reassessing public sector wages as part of the government’s administrative reform drive, Maait said at the presser. He implied that public sector wages, which are covered under the Civil Service Act, are a mess, calling them “dysfunctional.”

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