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Monday, 11 May 2020

Maait signals austerity measures if covid-19 crisis persists

BUDGET WATCH- Austerity measures in the cards if crisis continues into FY2020-2021 -Maait: The government could cut back on spending in its FY2020-2021 budget if the covid-19 outbreak persists after July, Finance Minister Mohamed Maait said in a meeting with President Abdel Fattah El Sisi and Prime Minister Moustafa Madbouly yesterday. Public spending is on track to rise by 9% in the coming fiscal year, including substantial budget increases for health, education and welfare. But the finance minister yesterday raised the prospect of new austerity measures should the outbreak continue into the new fiscal year, telling the president that the ministry would move to review or freeze some of its outgoings to protect its financial position.

The public purse is yet to be seriously impacted by the virus: Maait told El Sisi that public finances have so far been able to withstand pressures caused by the downturn, despite the government seeing a EGP 75 bn revenue shortfall during the second half of the fiscal year ending 30 June.

The Health Ministry wants its budget allocation raised by EGP 8.5 bn: The Health Ministry has asked parliament to sign-off on a EGP 8.5 bn increase to its FY2020-2021 budget allocation to help it face covid-19, House Planning and Budget Committee deputy chair Yasser Omar tells the local press. The government has earmarked EGP 254.5 bn for health spending — a 45% increase from the current fiscal year — but ministry wants to direct EGP 4 bn of the extra funding to the government’s health insurance scheme, EGP 3 bn to public health services, and a further EGP 1.5 bn as new funding for preventive medicine.

The collapse in oil prices is giving public finances a massive leg-up right now: The government spent just EGP 21 bn on fuel subsidies during the first nine months of FY2019-2020, less than half of the EGP 53 bn allocated for the entire year, Reuters reports, citing an unnamed Oil Ministry official. This is a 65% drop in spending compared to the EGP 60.1 bn shelled out during the first nine months of FY2018-2019. The collapse in oil prices — which fell by as much as 74% during the first four months of the year — has helped.

Also from Maait yesterday- Gov’t still on track to beat debt-to-GDP targets: The government is expecting public debt to GDP to reach 85% by the end of the ongoing fiscal year, Maait said yesterday. This is a downward revision from the 83% projected before the covid-19 outbreak, but still beats the 89% target in the budget.

Primary surplus expected to fall below expectations: Forecasts for the primary budget surplus have also been revised downward to 1.5% by the end of the fiscal year, from a previous forecast 2%, Maait said. More pressure on the primary surplus could drive it down to 0.6% in FY 2020-2021 if the crisis continues to December, Maait warned last week.

The ministry is also considering a less favorable scenario for debt, which could see debt scale up to 88% of GDP and the budget deficit widening to 7.8% or 7.9% by the end of FY 2019-2020. We had more on last Wednesday.

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