Egypt’s financial performance during the novel coronavirus (COVID-19) pandemic has exceeded expectations, according to the testimony of the International Monetary Fund (IMF), Minister of Finance Mohamed Maait said on Saturday.
The performance was outlined in detail in the Financial Monitor and Outlook for the World Economy Report for October 2020, issued last Thursday. The report reflected the positive results of Egypt’s successful experience in economic reform, which remains highly praised by international institutions.
Maait said that the fruitful economic reforms launched by President Abdel Fattah Al-Sisi, and supported by the Egyptian people, gave the national economy the resilience it needed to face internal and external challenges.
He also said that this was evident in the flexible and rapid response to the global crisis. The state pursued a proactive policy of allocating 2% of gross domestic product (GDP) to support the sectors and groups most affected by the pandemic-caused economic downturn. This contributed significantly to mitigating the shock, whilst also supporting the national economy.
Maait said that the IMF expects the Egyptian economy to undergo a rapid recovery in the medium term. The country will also experience growth rates at the highest pre-coronavirus levels, and the decline of the total GDP deficit to 5.2% during fiscal year (FY) 2022/23 and 3.8% by FY 2024/25.
This would reflect the ability of Egyptian financial policies to positively and effectively deal with local and international variables. This would take place in a way that translates the unprecedented structural reforms that the state is pursuing to improve the performance of public finances in a sustainable manner.
He added that according to IMF estimates, the state budget will achieve a primary surplus of 0.4% of GDP during the current, despite the pandemic. This is set to rise to 2.1% during FY 2022/23, continuing this approach at a sustainable rate of 2% on average until 2025.
Maait added that the IMF expects a 20% increase in the state’s total public revenues during FY 2020/21, compared to 19.2% in the previous FY. There will be a continuation of this growth in revenues until FY 2024/25, especially in light of the measures taken by the government to hedge against risks of fluctuating revenues.
The Egyptian government has already put in place a package of rational policies, with public expenditures expected to decrease to 25.4% in FY 2020/21, compared to 28.4% in the previous FY.
Maait said that the IMF report indicates a state of ambiguity on the world economy’s outlook, while the optimistic outlook for the Egyptian economy continues. For the latter, the IMF has raised its estimate for Egypt’s economic growth rate to 3.5%, instead of 2%.
The state’s general budget recorded a slight initial surplus of EGP 100m during the first quarter (Q1) of the current fiscal year, despite the repercussions of the coronavirus crisis. This ensured that the Egyptian health sector’s needs were met, alongside those of the country’s budgetary bodies, whilst also greatly increasing government investments and paying pension funds dues.
According to the minister, the annual growth rate of revenues increased to 18.4% during the period from July to September 2020, despite the continuing negative effects of the pandemic on economic activity.
Meanwhile, the annual growth rate of expenditures reached 11%, due to: the increase in government investment allocations; the provision of support allocations; social protection programmes; and increased spending on the health and education sectors.
Ahmed Kouchouk, Deputy Finance Minister for Financial Policies and Institutional Development, confirmed that Q1 of FY 2020/21 witnessed a 5.1% increase in total budgetary allocations for wages and workers compensation, compared to last year.
This indicates the Ministry’s continued efforts to extend the life of the country’s debt, which reached about 3.2 years in June 2020, instead of 1.3 years in June 2013 and about 1.8 years in June 2014. It is expected to reach 3.8 years by June 2021, Kouchouk added.
The Ministry of Finance has fulfilled the IMF’s dues for Q1 of FY 2020/21, by recording net bond issues of about 71%.
Kouchouk said that the total government investments implemented during the period from July to September of FY 2020/21 witnessed an increase of 60% to EGP 40bn. The investments financed by the state increased to about EGP 28.4bn, an increase of 29% over the same period of last year.