Egypt targets 2 per cent primary surplus in 2018-19 budget

Cairo: Egypt is targeting a primary surplus of 2 per cent of GDP in its 2018-19 fiscal year budget, the finance ministry said on Friday, as it looks to tighten its finances and push ahead with economic reforms tied to a $12 billion IMF loan programme.
The 2 per cent target would be a marked improvement from the 0.3 per cent primary surplus the government expects to achieve in the current fiscal year. A primary surplus means that the state's revenues cover expenses before interest payments on debt.
The draft budget must be approved by parliament and ratified by the president before the start of the fiscal year, which begins in July.
As part of a $12 billion three-year IMF lending programme that Egypt began in late-2016, Cairo has been slashing energy subsidies and raising new taxes to draw investment that fled after its 2011 protests.
A finance ministry statement outlining the draft budget saw tax revenues jumping to 770.28 billion pounds ($43.87 billion) in FY 2018-19 from 624.20 billion in the current fiscal year. Egypt is eyeing an economic growth rate of 5.8 per cent for the next fiscal year compared to 5.5 per cent currently, according to the statement, and a budget deficit of 8.4 per cent, down from 9.8 per cent.
The budget also sees inflation falling to 10 per cent from about 11.5 per cent currently.
"The budget deficit may not fall below 9 per cent in the coming fiscal year considering that the government may have to increase social support to offset the impact of expected economic reforms, especially in electricity and petroleum products," said Reham El Desouki, an economist at Arqaam Capital.
Egypt plans to cut fuel subsidies by a quarter to 89.075 billion pounds and nearly halve those for electricity to 16 billion pounds in the next financial year, but will raise food subsidies slightly, a separate government document revealed this week.
The scope of savings on petroleum subsidies will depend however on global oil prices, which the budget set at $67 per barrel compared to a current price of about $73.
Foreign holdings in Egyptian treasuries, which have surged over the past year on the back of the country's high yielding debt, continued to rise, the finance ministry statement showed, to $23.1 billion at the end of March 2018 from $20 billion in December.