State revenues took a EGP 220 bn hit in FY2019-2020 due to the pandemic, Finance Minister Mohamed Maait told Hapi Journal at the Regional Forum for Medical Insurance and Healthcare yesterday. The virus outbreak has placed government finances under pressure as the three-month lockdown in the second quarter hit tax revenues, the suspension of flights brought the tourism sector to a standstill, and trade disruptions caused Suez Canal revenues to dip. The government’s EGP 100 bn emergency fiscal package provided tax relief to companies in vulnerable sectors that allowed them to defer payments over three installments. By mid-May, the public purse was already facing a EGP 75 bn shortfall, most of which was due to lower-than-expected tax receipts.

What’s being done to plug the gap? The Finance Ministry has enacted several measures to prevent the budget deficit from widening significantly. The government has been able to borrow from international institutions, such as the USD 8 bn in IMF funding and a USD 2 bn loan from regional and international banks, and has taken to the credit markets, holding a record USD 5 bn eurobond issuance in May, to patch up some of the short-term funding pressures. The 1% tax on salaries and the 0.5% levy on state pensions through FY2020-2021 is providing an additional source of income, while efforts to standardize state spending and collections are hoped to increase financial efficiency.