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Tuesday, 14 May 2019

Egypt caps FY2019-20 state spending at EGP 1 tn

EXCLUSIVE- Gov’t caps FY2019-20 public spending at EGP 1 tn: The government has placed a EGP 1.01 tn cap on public spending in FY2019-20 in a bid to hit its deficit- and debt-reduction targets, two government sources told Enterprise. The cap is equivalent to spending forecasts stated in the draft FY2019-20 budget, excluding debt service payments. The move could include a drive for more centralized purchasing for civil service offices and a tweak to spending limits for individual ministries. The House of Representatives cannot pass a further spending bill unless “absolutely necessary,” the sources said.

Context: The move is part of a fiscal strategy that aims to slow annual public spending growth to 3.5% by FY2021-22 from the current 11.5%. It also targets increasing inflows into the government’s coffers by 12-16% over the next three years. Cabinet has already greenlit the move as part of a package of “fiscal correction measures” to support economic reform, the sources confirmed. The government also recently placed a USD 14.33 bn ceiling on foreign borrowing in the coming fiscal year.

Budget targets: The government is looking to shrink the budget deficit to 7.2% of GDP in FY2019-20, from 8.4% in the current fiscal year, and cut the primary budget surplus to 2%, according to the draft budget. Public debt, meanwhile, is forecast to reach 89% of GDP in the coming fiscal year, down from a projected 93% in FY2018-19. The government’s debt control strategy aims to reduce the debt-to-GDP ratio to 80-85% and the ratio of interest payments to 32% of GDP by FY2021-22.

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