Egypt’s Ministry of Finance was engaged during January in conducting a community dialogue on the draft budget for the fiscal year 2022/2023, which is scheduled to start next July; the views and proposals for the new budget draft will be heard before it is presented to the Cabinet to be discussed, and then referred to the Parliament during the third quarter of the current fiscal year 2021/2022.
The ministry announced the initial features of the draft budget for 2022/2023 in a plan seeking to recover from the repercussions of the Coronavirus.
The 2022/2023 draft budget comes with a growth rate of 5.7 percent, while reducing the overall deficit and debt.
Minister of Finance Mohamed Maait stated that Egypt targets a growth rate of 5.7 percent of gross domestic product (GDP) during the fiscal year of 2022/2023, and to gradually hike to 6 percent in 2024-2025.
Maait added that the draft budget for the fiscal year 2022/2023 will witness more spending on improving people's lives and facilitating decent livelihoods, in implementation of presidential directives.
According to the announced data, the priority in the "new republic" will be for effective programs in health and education. They are the mainstay of building the Egyptian person, strengthening the pillars of investment in human capital, in addition to maximizing development efforts in various fields.
The minister stressed that public investments will be expanded; in a manner that contributes to raising the efficiency of basic services, by proceeding with the completion of the largest project in the history of Egypt for rural development “Hayah Karima”, and raising the standard of living for 60 percent of Egyptians, in a way that enables citizens to benefit from the fruits of economic growth, in a sustainable and comprehensive manner, and creating more productive employment opportunities, while continuing to expand the social protection network; to become more targeted to the poorest classes.
He added that the draft budget for the new fiscal year aims to move forward in promoting the movement of economic activity, in light of the coronavirus pandemic, by carrying out broad structural reforms in various fields, in a way that contributes to pushing the private sector to lead the locomotive of economic growth, and helps in localizing the industry, increasing productivity, deepening the local component, and stimulating exports, so that efforts to create an investment climate are maximized, encouraging investors, and overcoming obstacles, which supports the trend towards expansion in productive activities, attention to small and medium enterprises, manufacturing industries, and the expansion of the use of resources sustainable clean energy.
Maait indicated that, in the new budget draft, we [the government] are keen to lay the foundations for financial discipline and the sustainability of macroeconomic indicators, as we target a growth rate of 5.7 percent of GDP during the 2022-2023 fiscal year, and to gradually rise to 6 percent in 2024-2025.
He pointed out that his country aims to achieve a primary surplus of 2 percent at the medium level, and to reduce the total deficit to 6.1 percent in the 2022-2023 fiscal year, and to 5.1 percent in 2024-2025, and bring the debt-to-GDP ratio down to less than 90 percent in the fiscal year 2022-2023, and to 82.5 percent by June 2025.
It also targets to reduce the debt service ratio of total budget expenditures to less than 30 percent compared to the target of 31.5 percent during the 2021-2022 fiscal year, and extend the debt life to approach five years in the medium term instead of current three years, by expanding the issuance of various medium and long-term government bonds, and targeting new instruments such as sukuk, sustainable development bonds, and green bonds, which contribute to expanding the investor base and attract additional liquidity to the government securities market, in a way that helps reduce the cost of debt.
“Since the beginning of the pandemic, the government has prepared a balanced framework to deal with the unprecedented situation and its negative impact on the local and global economy, especially in light of the prevailing and prolonged uncertainty and the ensuing inflationary effects, disruption in the supply chain, and a global rise in the prices of commodities, basic materials and the cost of transportation, in a way that leads to the sustainability of maintaining economic, financial and social stability without eroding the gains and successes achieved by the economic and social reform program,” the minister noted.
He clarified that this will take place by targeting temporary mechanisms and measures that are flexible and able to exit from them according to developments that may occur on the economic and social level during the various stages of the crisis in the short and medium term, in addition to targeting the provision of the greatest degree of protection and support to the most vulnerable groups and the most affected economic sectors.
Egypt aims to increase revenues by an average rate between 13 percent and 15 percent in the draft budget for the next fiscal year 2022-2023, according to the Deputy Minister of Finance for Financial Policies, Ahmed Kojak.
The Deputy Minister of Finance for Financial Policies explained in TV statements that these indicators enable the state to provide allocations for improving wages and rewarding workers, as well as providing sufficient funds to improve infrastructure, as well as reducing the deficit and achieving debt targets.
Egyptian President Abdel Fatah El-Sisi decided to increase the minimum wage by 13 percent to LE 2,700, from LE 2,400 currently. Thus, the wages item in the new budget will increase to about LE 400 billion, from the LE 361 billion estimated in the current 2021/2022 budget.
Economist, Mostafa Ibrahim, said that the Egyptian state's general budget for the new fiscal year aimed to achieve unprecedented positive macroeconomic indicators, based on two factors. The first is the continuation of increasing public investments in all areas of infrastructure, education and health to maintain a high economic growth rate while rationalizing government spending with the aim of maintaining a primary surplus.
Secondly, the growth rate of Egyptian exports, which is expected to range between $40-50 billion this year, and reach $70 billion in 2024, according to International Monetary Fund estimates, Ibrahim added.
Ibrahim noted, in a statement to CNN Arabia, that the most prominent sectors that the Egyptian government relies on to continue achieving a high growth rate of 5.7 percent in the fiscal year are the infrastructure, such as transportation projects and the establishment of fourth-generation cities, as well as water desalination projects and the delivery of water, sanitation, gas and electricity services to villages benefiting from the "Hayah Karima" initiative, which seeks to benefit about 60 million Egyptians, according to statements by Egyptian President Abdel Fattah El-Sisi, on the sidelines of the "World Youth Forum" held in Sharm El-Sheikh. .
The second part is related to the communications and information technology sector, which is one of the promising sectors on which the government depends mainly in the digital transformation.
Ibrahim pointed to the most prominent challenges facing the Egyptian economy, the most important of which are short-term debt, as well as government bills and bonds, which face the challenge of an expected rise in interest rates in global markets, which increases the burden of external debt interests, especially with the effects of the Coronavirus pandemic, the rise in energy prices globally, and the increase in the prices of strategic commodities such as wheat and meat, pointing in this regard to the government’s attempt to expand the cultivation of strategic commodities, and increase the stock of imported goods from abroad by building new silos.
The Egyptian Ministry of Finance stated that the government, since the beginning of the Corona pandemic, has prepared a balanced framework to deal with the unprecedented situation and its negative impact on the local and global economy, especially in light of the prevailing and prolonged uncertainty and its ensuing effects. This is in order to achieve the sustainability of maintaining economic, financial and social stability without eroding the gains and successes achieved by the economic and social reform program, by targeting temporary mechanisms and measures that are flexible and able to exit from them.