An employee carries money at an exchange office in downtown Cairo – Reuters/Amr Dalsh
CAIRO – 12 December 2018: Minister of Finance Mohamed Ma’it said that Egypt aims to reduce the total deficit to less than 5 percent of the gross domestic product (GDP) and to lower the public debt to less than 70 percent of GDP.
“These are the normal rates,” the minister noted during the meeting of the Economic Affairs Committee of the House of Representatives.
Ma’it referred to the deficit in Morocco which recorded 4.5 percent and that the public debt is about 67 percent of GDP, saying: "These are normal rates;deficit less than 5 percent and debt ratio less than 70 percent."
He pointed out that as a result of the policies of the last four years, Egypt's budget achieved a primary surplus of LE 4 billion at the rate of 0.1 percent of GDP forthe first time by the end of fiscal year 2017/2018.
The minister added that the government aims to achieve a primary surplus of2 percent, and a total deficit of 8.4 percent of GDP by the end of the current fiscal year.
As per the public debt, Ma’it said that the debt ratio in 2017 amounted to 108 percent of GDP, while it hit 98 percent during last year, pointing out that the government aims to reduce this percentage during the current fiscal year to 92 percent, to reach 80 percent during the fiscal year 2020/2021.
The minister pointed out that Egypt has faced difficult circumstances that caused an increase in debt, in conjunction with the weakness of the state revenues and the continuation of the primary deficit, which forced the state to continuously borrow to meet the primary deficit of food and drink, debt service and debt installments.
He added that these circumstances were changed during the last fiscal year after the state recorded a primary surplus for the first time in 15 years, saying: "This means that we ate and drank from our revenues."
“President Abdel Fatah al-Sisi called on the government to accelerate further reduction of these rates, which requires non-traditional solutions to increase revenue growth, and the use of debt reduction in favor of improving the lives of citizens,” according to Ma’it.
Regarding inflation, the minister said that the government aims to reduce inflation rate to less than 10 percent by the end of the current fiscal year on June 30, 2019.
“The reduction of deficit, debt, unemployment and inflation reflected on Egypt’s rating in the reports of international institutions, as the reports emphasized political and institutional stability and improved economic indicators in Egypt.
He added that the past six months have been difficult for many countries such as Argentina, Turkey, South Africa, Mexico and Venezuela, but Egypt has been able to absorb those shocks, indicating that the reforms gave the Egyptian economy immunity against shocks.
As per emerging markets, Argentina and Turkey have been facing currency crises, which led Argentina’s central bank to set interest rates at 60 percent.
The Central Bank of Turkey also raised its benchmark interest rate by 625 base points to 24 percent on September 13, 2018.
With the downtrend of currencies in these countries, in addition to the hike of their interest rates, foreign investors were morelikely to exit other markets and enter these countries' markets.
Egypt embarked on a bold economic reform program that included the introduction of taxes, such as the value-added tax (VAT), and cutting energy subsidies, with the aim of trimming the budget deficit. It also provided facilities and legislative reforms to encourage investors to invest in Egypt.