Minister of Planning Ashraf El-Araby said that the government aims to reduce government investment as a share of the gross domestic product (GDP) within its plan to control government spending and tackle the budget deficit.
The government’s investment allocations amounts to EGP 150bn (equivalent to 4.4% of GDP) in the budget of the current fiscal year (FY), compared to EGP 69bn (equivalent to 2.5% of GDP) in the last FY. The allocations jumped to this level because of the social housing programme that the government plans to implement this current FY to build 500,000 housing units.
El-Araby said that the government does not aim to reduce the government’s investment allocations as a value but as a share of the GDP; however, Egypt’s economic reform programme published by the International Monetary Fund (IMF) last week shows that the targeted allocation value in the coming FY will decline to EGP 94.4bn (equivalent to 2.3% of GDP), and is expected to remain near that rate until FY 2020-2021.
Egypt’s economic reform programme also shows that the value of government investments in FY 2018-2019 will amount to EGP 112bn and EGP 130.8bn in the FY that follows before it reaches EGP 147.4bn in FY 2020-2021.
He said during a press conference on Sunday that reducing government investments will be matched by an increase in reliance on the private sector to cover the difference.
On the other hand, he said that inflation rates will decrease in April.
He added that the inflation rates in the second quarter (Q2) of the last FY recorded 19.5%, and that the decline in inflation rates will be linked to the market’s response and flexibility to accept the recent economic decisions.
He also said that achieving a growth rate of 4% over the current year that was driven by an improvement in the trade balance and the growth of labour-intensive industries is better than achieving a consumer growth rate of 5%.
He pointed out that the expansion in foreign debt depends on the size of GDP and the ability to repay. There will always be a permanent need to borrow as long as there is a deficit on the state budget. External borrowing is less expensive than domestic borrowing.