Egypt has taken significant measures to address its budget deficit, as revealed by the finance minister on Sunday. In a press conference, Finance Minister Mohamed Maait announced that Egypt is set to increase its primary budget surplus to over 3.5% in the upcoming fiscal year starting in July.
The primary surplus, excluding interest payments, is a key indicator of fiscal health. Interest payments, constituting more than half of total expenditure in the seven months leading to January, have contributed significantly to Egypt’s persistent deficit.
In a recent projection, the finance ministry anticipated a primary general budget surplus equivalent to 2.5% of the gross domestic product for the current fiscal year (2023/24). To bolster its finances, Egypt finalized a deal in February, selling development rights to the Ras al-Hikma Mediterranean resort to Abu Dhabi for $24 billion. Additionally, the country anticipates over $20 billion from an International Monetary Fund (IMF)-led support package inked last Wednesday, which includes a $3 billion contribution from the World Bank.
Finance Minister Maait highlighted the positive impact of the Ras al-Hikma deal on the general budget, stating that it would contribute a substantial amount in local currency. This development is expected to result in a deficit lower than the targeted amount.
Maait acknowledged challenges faced by the budget, including reduced revenue from the Suez Canal and other sources. Factors such as a depreciating currency and higher interest rates on Egypt’s debts have contributed to increased expenditures. As part of the IMF package, Egypt devalued its currency, adjusting it to around 50 Egyptian pounds per dollar from 30.85 pounds, and raised overnight interest rates by 600 basis points.
The finance minister emphasized the government’s commitment to a program of budgetary restraint, ongoing sales of state assets, and the goal of maintaining the country’s debt below 90% of the gross domestic product. The strategy aims to mitigate the impact of a chronic dollar shortage, which has caused significant delays in the release of goods from ports since January. To date, Egypt has released goods totaling $13 billion in value.