Egypt’s Ministry of Finance downgraded its expectations for oil prices for fiscal year (FY) 2019/20 budget to $64 per barrel from $68, according to a ministerial report, evaluating budget performance over the first half of current FY.
International prices of oil remarkably fell to $54.4 per barrel due to the Coronavirus threats that caused the death of 909 Chinese citizens, in addition to 40,000 cases globally, media reports said.
New expectations for oil prices over the Egyptian budget is due to the decreasing daily production of crude oil in Nigeria, Venezuela, and Libya that suffers political conflicts, the report mentioned.
The report said that every increase in oil prices by $1 from the expected assumptions affects the overall budget deficit, as well as the net relationship between the Egyptian Petroleum Authority and the Ministry of Finance by EGP2.3bn, which represents 0.4% of GDP.
The report expects a slight decline in interest rates on government debt instruments by the end of the current fiscal year to reach 15.4% compared to 15.5%.
The Monetary Policy Committee (MPC) of the Central Bank of Egypt (CBE) has taken a decision to cut interest rates from July 2019 to date by 3.5%, while the report attributed this decline in interest rates to the decrease in inflation rates -which has been on a downward path since 2019- and lower interest rates internationally.
The report said that global growth rates will decrease to 3.2% in 2020 compared to 3.6% in 2018, which will affect the revenues of the Suez Canal Authority, customs, as well as tax on imports, adding that every 1% drop in global growth negatively affects the revenues’ total of public treasury from Suez Canal Authorities receipts by 2%.