Government reviews FX rate, oil price at 2018/2019 budget
FinMin sees growth accelerating, forecasts weaker average EGP exchange rate this fiscal year, will budget for oil at USD 67 / bbl for next year: The Finance Ministry revised its expected average USD:EGP exchange rate for the current (2018-19) fiscal year ending in June to EGP 18 to the greenback against an earlier forecast of EGP 17.25, the ministry said in its mid-year review of the FY2018-19 budget (pdf). It also said it expects average yields on Egyptian treasury bills and bonds this fiscal year to come in at 18.6% against a forecast of 14.7%.
Some relief on the oil price front: The Finance Ministry now says that it expects the average price of a barrel of oil to come in at USD 74 in the current fiscal year and is forecasting USD 67 / bbl for 2019-2020.
How this all feeds into the budget: Every USD 1 / bbl increase above the expected oil price will cost the government EGP 2.3 bn. Meanwhile, the government will see costs rise EGP 3 bn for every EGP 1 the pound weakens against the greenback, the ministry said.
Economic growth seen accelerating: The FinMin raised its target for GDP growth to 6.2% in 2019-20 from 6.0% previously and is leaving its target for the current fiscal year unchanged at 5.8%.
The Finance Ministry sees the budget deficit falling consistently in the years to come:
- 8.4% in 2018-19
- 7.1% in 2019-20
- 5.8% in 2020-21
- 4.0% in 2021-22
What about debt, unemployment? The Finance Ministry is targeting an unemployment rate of 7-8% in the medium term and sees debt at about 83.1% of GDP by June 2021.
Spending on health, education, subsidies is up: In the first half of the 2018-19 fiscal year, the state saw its total expenditure on education rise by 20.5%. It spent 27.2% more on healthcare and saw its bill for fuel subsidies rise just under 14% to EGP 30.2 bn.