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Monday, 26 April 2021

FinMin releases Egypt’s draft FY2021-22 budget

FinMin publishes draft budget as House pushes on with its discussion: The Finance Ministry released yesterday its draft FY2021-2022 budget (pdf), which is under discussion at the House of Representatives after earning cabinet sign-off last month. MPs need to approve the draft before the start of the fiscal year on 1 July.

Among the highlights:

Our financing gap is expected to increase 7.1% to EGP 1.06 tn, with the bulk of the gap, (nearly EGP 990 bn) to be plugged through local treasury sales. The remainder will come from EGP 66 bn in eurobonds and another EGP 123.8 bn in loans from foreign institutions. At least 70% of all new sovereign issuances in FY2021-2022 will be long-term, as the government continues to shift to longer tenor debt.

The budget deficit is expected to narrow to 6.7% of GDP, from an expected 7.8% in the current fiscal year, before falling to 6.2% in FY 2022-2023. The ministry expects the country’s primary surplus to increase to 1.5% in FY2021-2022 from 0.9% this year, before falling to 1.3% the year after.

Government spending to rise 14% next year: The ministry expects the government to spend EGP 1.84 tn in FY 2021-2022, up 14% from its EGP 1.61 tn projected spend this year.

But revenue growth to outpace rise in spending: Revenues are forecast to rise 22% to reach EGP 1.36 tn during the year. This will be driven by an 18% rise in tax collection, which will bring in EGP 983 bn compared to an expected EGP 830 bn in the current fiscal year. Income from other sources will rise 33% to EGP 380 bn.

Debt service will account for almost a third of government spending, with payments remaining the largest single spending item in the budget, rising more than 2% to EGP 579 bn.

Health and education will see the largest spending increases: Spend on healthcare will rise 16% to EGP 108.8 bn while education will receive EGP 172.6 bn, up almost 10% on FY 2020-2021.

But less will be spent on welfare programs: The ministry has allocated EGP 283 bn to social protection programs in the coming year, down slightly from EGP 286 bn this year.

Other key spending figures:

  • The public wage bill will rise 11% to EGP 361 bn, largely as raises for government employees and civil servants come into effect on 1 July.
  • Subsidies and social welfare payments will climb 5% to EGP 321 bn, but fuel subsidy spending is projected to drop 35% to EGP 18.4 bn.
  • Public investment will rise 54.5% to EGP 358 bn.
  • Spending on buying goods and services for the government will climb a bit over 22% to EGP 103 bn.
  • State grain buyer GASC will provide 8.6 mn tonnes of wheat in FY2021-2022, 5.1 mn of which will be imported.
  • EGP 2 bn in incentives will be paid out during the fiscal year to encourage car owners to replace outdated cars with natural gas-powered vehicles under the state’s multi-year natgas transition plan.

Also in the forecast:

  • GDP growth: 5.4%;
  • Public debt: 89.5% of GDP
  • Oil prices (Brent): USD 60 / bbl.
  • Wheat prices (AHDB futures): USD 255 / tonne.

The budget is getting attention from the foreign press: Reuters has the story.

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