** #4 EXCLUSIVE- The Madbouly government has started work on the FY2019-20 budget, with various government departments tallying up their budgets and projection, a senior government official told us yesterday. The government is targeting GDP growth of 6% in its next fiscal year, up from 5.5% this fiscal year. The Finance Ministry apparently expects the budget deficit will fall to 8% of GDP in FY2019-20, despite the spike in oil prices.

Egypt will eliminate fuel subsidies next fiscal year as per the IMF-sanctioned economic reforms, which will drastically reduce the deficit, noted the source. Tax revenues are projected to go up 15% next year, from a projected 14.6% growth rate this year. The government hopes to reduce Egypt’s public debt to 88% of GDP, largely through its debt control strategy.

It is early days yet, but the Finance Ministry is budgeting for oil at USD 80/bbl in its next budget, the official said. The ministry reportedly believes oil in the neighborhood of USD 80/bbl could be the new norm and will provide a realistic threshold when calculating fuel subsidies cost, the source noted. Egypt has already overshot its budgeted expenditures on fuel in 1Q2018-19 by around EGP 1 bn thanks to higher than projected oil prices, according to Finance Minister Mohamed Maait. The government had expected oil prices to average USD 67/bbl this year. Other government sources had told us that the spike in oil prices could see the budget deficit rise to 8.6% of GDP in FY2018-19, from an initially projected 8.4% of GDP.