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Tuesday, 21 January 2020

Egypt to beat debt-to-GDP target this year -Maait

Egypt to beat debt-to-GDP target this year + all you need to know about FinMin’s epic presser: The Finance Ministry expects to reduce its debt-to-GDP ratio to 83% by the end of the current fiscal year, easily beating the 89% target included in the FY 2019-2020 budget, Finance Minister Mohamed Maait said at a press conference yesterday. The primary surplus improved slightly to 0.5% of GDP in the first half of FY2019-2020 from 0.4% a year earlier, Maait also said, reiterating figures announced at last week’s cabinet economic group meeting. The ministry is looking to narrow the primary deficit to 2% by the end of the fiscal year.

Gov’t raises growth expectations for current fiscal year: The ministry now expects the economy to grow at a rate of between 5.8% and 5.9%, up from a previous 5.6% forecast, Maait said. Egypt’s GDP is expected to grow at an annual clip of at least 5.5% over the next few years, according to a quarterly report published by the government last month.

But the budget deficit is growing: Despite debt-to-GDP falling this year, state finances are falling deeper into the red, with the budget deficit rising to 3.8% of GDP in the first six months of FY2019-2020 compared to 3.6% a year earlier. Maait said the increase was caused in part by the government’s EGP 49 bn in interest paid between July and December 2019.

Tax revenues came in at EGP 304 bn in 1H FY2019-2020, Al Mal quoted Vice Minister of Finance Ahmed Kouchouk as saying. Sovereign tax revenues (including the Suez Canal, the Central Bank of Egypt, and interest on government debt instruments) fell 27% y-o-y, while non-sovereign tax revenues increased 10%. The Finance Ministry had expected Egypt’s tax revenues in FY2019-2020 to comprise 14% of the country’s GDP in a report last year.

New incentives for industry on the way: Maait said that the finance and trade ministries will launch a package of measures to support local industry, which could include VAT incentives, export subsidies, or fuel price cuts for factories. In recent weeks we have gotten word that the government will pass VAT amendments to remove paper companies from paying VAT on raw materials, and a gas pricing scheme for petchem companies. Meanwhile, exporters have been demanding changes to the government’s new EGP 6 bn export subsidies framework.

Speaking of export subsidies — more settlements on the way: The ministry will sign 40 agreements with exporters in “the coming days” to disburse overdue subsidies, Hapi Journal quoted Kouchouk as saying. A total of 370 companies are currently owed money by the government under an old framework which promised to pay out export subsidies through the Export Subsidy Fund, which said last month it will disburse 40% of the total overdues before mid-2020. Settlements of the overdue payments have reportedly been moving forward since last September, in tandem with the launch of the new framework.

Ministry sets up green bonds committee: Kouchouk said that the ministry has formed a committee to plan for the issuance of green bonds, according to Al Mal. Maait told us last week that green bonds will likely take the lead in the government’s debt sales for the remainder of the fiscal year.

Also from the presser: The ministry will decide by the end of February how it will amend taxation on EGX trades, Reuters quoted Maait as saying. We have background on this here and here.

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