Egypt’s budget deficit between July and February hit 7% of the GDP, compared to 8.2% for the same period last year as revenues of the third biggest economy in Africa accelerate, a recent report issued by the Ministry of Finance revealed.
The country’s budget deficit during those eight months registered EGP 226.6bn in the aforementioned period during fiscal year (FY) 2016/2017, compared to EGP 222.9bn during the same period in the last FY.
“This could be explained in light of an increase in the revenue growth rate during the period of study, compared to the same period last year, exceeding the growth in expenditure during the same period, recording 22.6% for the first, and 14.6% for the latter,” the ministry said in its report.
Authorities are attempting to boost economic growth while slashing a budget deficit that stands above 10% of the gross domestic product (GDP).
The government is on track to apply a reform package introduced by the IMF, aiming at cutting the budget deficit to disburse the second instalment of a $12bn loan programme agreed on in November.
Last week, an IMF delegation arrived in Cairo to review Egypt’s progress with its reforms.
“A falling budget deficit digit is a good sign that the government programme is working, but the growth is in question here with a big anticipated fall in consumer spending due to higher inflation rates,” Fred Haung, a Middle East economist at Deutsche Bank told Daily News Egypt.
Consumer spending represents almost two thirds of the GDP, according to official data.
Inflation rate hit 32.25% in March, its highest level in 30 years, and it is expected to hover at around 20 per cent until the end of 2017, according to a recent report by the London-based consultancy Capital Economics.
“New reforms have resulted in a jump in revenues; but, on the other hand, expenses are growing too,” Haung added.
During the eight months of FY 2016/2017, revenues increased to EGP 310.5bn, or 9.6% of the GDP, from EGP 253.2 billion, or 9.3% of the GDP, in the same period of FY 2015/16, the report said.
The expenses grew to EGP 532.5bn, or 16.4% of the GDP, in FY 2016/17 from EGP 466.2 billion, or 17.2% of the GDP, in FY 2015/16.