Egypt generated a EGP 3.2 bn primary surplus in 1H2021-2022, Finance Minister Mohamed Maait said during the weekly cabinet meeting yesterday. The surplus came on the back of an increase in tax revenues, which rose 16% y-o-y, the minister said.

The surplus is down on an annual basis, but it’s still a surplus: The surplus is down 77% on the same period last fiscal year, but marks a positive shift from where we stood in the first quarter of the fiscal year, when the primary balance fell into a slight deficit, while the overall deficit widened.

Is the surplus on track with expectations? The Finance Ministry expects the primary surplus to increase to 1.5% of GDP this fiscal year, from 0.9% in FY 2020-2021. We won’t know how we fared in 1H2021-2022 in relation to that forecast until GDP figures are released for the second quarter. GDP growth hit 9.8% in the first quarter of FY2021-2022, and is expected to record 6-7% in the second quarter, Planning Minister Hala El Said has said.

The budget deficit won’t shrink as much as previously hoped: The budget deficit is now expected to stand at 6.9% by the end of FY2021-2022, after the ministry revised upwards its prior forecast of 6.7% on the basis of the first-half data. The deficit narrowed from 8.0% to 7.4% last fiscal year, and is targeted to fall to 6.1% in FY 2022-2023.

Public investment increased 12% y-o-y to EGP 82 bn in 1H2021-2022, with the biggest increases to spending on premiums paid to pension funds (up 77%), health (up 30.4%), and education (up 21.1%). Spending on state pensions and the Takaful and Karama programs was up 10.7%, while spending on salaries also increased by 10.4% as the new EGP 2.4k public sector minimum wage came into effect. The pandemic also saw spending on meds triple to hit EGP 9.2 bn.

Silence on debt repayments: Maait didn’t disclose how much the government spent on servicing its debts, which is the single-biggest cost to the public purse. Official figures (pdf) show that interest payments alone accounted for 41% of all expenditure during 1Q 2021-2022. The ministry expects to spend EGP 579.6 bn on interest during the course of the year, amounting to almost a third of total expenditure.