Archive for budget deficit

Agency: Egypt budget deficit expected to widen to LE200 bn

by admin
December 31st, 2012

Egypt's budget deficit in the year to end-June 2013 could widen by 50 percent from the original forecast made in July, according to a figure released by the planning minister Monday.

"The budget deficit is expected to rise to LE200 billion in the current fiscal year unless strict economic policies are put in place to confront it," the state news agency quoted Ashraf al-Araby as saying Monday.

The 2012/13 budget released in July had forecast a deficit of LE135 billion compared to an actual deficit of LE166.7 billion for the previous year. Economists at the time said that forecast was optimistic.

President Mohamed Morsy earlier this month suspended a series of planned tax increases as the country prepared for a referendum on a contentious new constitution, which was passed on 22 December.

The unpopular measures were deemed necessary to secure US$4.8 billion Egypt is seeking from the International Monetary Fund, which wants Egypt to rein in its deficit.

The government said last week it would not implement the measures for at least two more weeks to give it time to explain them to different parts of society.

Prime Minister Hesham Qandil said Sunday that he expected talks with the IMF to resume in January.

Araby predicted in November that this year's deficit would be 10.4 percent of gross domestic product, without stating the figure in pounds, up from the original forecast of 8 percent.

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State budget suffers incurable disease, says finance minister

by admin
December 31st, 2012

 

The state budget suffers from an incurable disease, with resources only covering 60 percent of public expenditures, state-owned Nile News quoted Finance Minister Momtaz al-Saeed as saying Sunday.

Government wages account for 25 percent of the budget, debt interests 25 percent, subsidies 27 percent and public investment 11 percent, he said during a press conference at the General Federation of Chambers of Commerce.

Egypt needs US$14.5 billion to offset its budget deficit and the public debt, he said. Foreign reserves  dropped from US$25 billion to US$15 billion in November due to the country's instability and the economy sustained an opportunity loss of US$20 billion due to investment concerns and declining domestic and foreign tourism, according to the minister.

He cited potential solutions of cutting expenditures by reducing wages or introducing a progressive tax system, which he said may not be appropriate at this time.  Borrowing and rationalizing subsidies, especially the 40 percent of subsidies he estimated go to those who don't need them, could also help ease the fiscal crisis without hurting the poor, he said.

Domestic and foreign debts amount to LE1.5 trillion, a burden he said would fall to future generations.

With negotiations to close a $4.8 billion International Monetary Fund expected to resume in January, Saeed say closing the deal would prove that the local economy is able to attract investment.

Prime Minister Hesham Qandil also said Sunday that the budget deficit is one of the biggest challenges facing the government, describing the economic situation as "critical," but also saying the country is not on the verge of bankruptcy.  

 

He said that the Cabinet would quickly take measures to address high unemployment and the gaping budget deficit, and promised to provide new job opportunities and improve the investment climate.

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Categories Egypt Economy
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Egypt not on verge of bankruptcy, says PM

by admin
December 30th, 2012

Prime Minister Hesham Qandil said Sunday that although the country's economic situation is "difficult and critical," the country is not going bankrupt.

“Countries don’t go bankrupt, but only companies do,” Qandil said at a press conference.

He said that the Cabinet would quickly take measures to address major economic challenges such as high unemployment and the gaping budget deficit, and promised to provide new job opportunities and improve the investment climate.

“The recent political crisis the country has been through [has] negatively affected the economy, tourism and foreign investments,” he added.

Qandil said that the budget deficit is one of the biggest challenges facing the government, adding that it will be resolved through increasing state profits, acquiring loans, reforming subsidies and fighting corruption.

The deficit is estimated at LE200 billion (US$27.5 billion).

Qandil said the Cabinet would hold talks with International Monetary Fund officials in January over the $4.8 billion loan that the government and the IMF reached an agreement on in November. The government requested a delay in final approval of the loan earlier this month during the unrest sparked by President Mohamed Morsy's controversial 22 November decree.

He said that the loan’s value is in the confidence boost it will give to the economy, not in the loan's amount, which will not cover the deficit.
 

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Categories Egypt, Egypt Top Stories
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Egypt far from bankruptcy, says govt

by admin
December 26th, 2012

Government spokesperson, Alaa al-Hadidy, on Wednesday said Egypt is far from the “frightening scenario” of bankruptcy.

“Bankruptcy is normally preceded by banks closing down and failure to repay debts,” he said. “This is not happening.”

“We suffer a budget deficit and a lack of revenues,” he added. “But not to the point of bankruptcy.”

He also said that downgrading Egypt is an adverse step, but that it does not affect the economy or negotiations with the International Monetary Fund.

Hadidy cited the trade minister as saying wheat reserves can last four months, sugar 37 days and cooking oil until mid-February.

Economist and former deputy prime minister, Hazem al-Beblawy, had told Al-Masry Al-Youm on Tuesday that Egypt is on the brink of a deep economic crisis that may lead to bankruptcy, and that foreign and domestic credit ratings of Egypt raise fears in the West and leading to low investor confidence.

“Standard & Poor's downgraded Egypt from level B to B- in its credit rating report,” he said. “This will make the pound fall against other currencies.”

The agency cut Egypt's long-term credit rating on Monday and said another cut was possible if political turbulence worsened, undermining the government’s ability to follow through on difficult but necessary economic decisions.

“The negative outlook reflects our view that a further downgrade is possible if a significant worsening of the domestic political situation results in a sharp deterioration of economic indicators such as foreign exchange reserves or the government's deficit,” S&P said.

Edited translation from Al-Masry Al-Youm

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PM: Stability key to fixing economy

by admin
December 25th, 2012

Prime Minister Hesham Qandil said on Tuesday that political stability was crucial to luring back foreign investors and tourists to help plug a yawning budget deficit and heal the country's ailing economy.



In a statement hours before the expected announcement of the result of a divisive constitutional referendum, Qandil said President Mohamed Morsy's government was committed to taking steps to improve economic growth.



The prime minister stressed the importance of political stability and security in the coming period, so that foreign investors could return to the Egyptian market, as well as tourism inflows that help support foreign currency reserves and plug the budget deficit.



"The main goals that the government is working towards now is plugging the budget deficit, and working on increasing growth to boost employment rates, curb inflation, and increase the competitiveness of Egyptian exports," the statement said.



Egypt's budget deficit surged to 11 percent of gross domestic product in the financial year that ended in June 2012 and is forecast to exceed 10 percent this year, adding to a public debt burden of 70 percent of national output that is already very high for a developing economy.



The country has been gripped by political rivalries and sometimes deadly protests over the vote on a new constitution that Morsy's Islamist backers say is crucial to democratic transition, but which opponents say has failed to guarantee personal freedoms and the rights of women and minorities.



Standard and Poor's cut the government's credit rating on Monday and officials confirmed on Tuesday that travelers had been banned from carrying more than US$10,000 in foreign currency cash in or out of the country amid worries over pressure on the pound and a rush by Egyptians to withdraw savings from banks.



Qandil said that despite political tensions, the pound had not moved more than 1 percent against the dollar in the past two weeks. Figures show that the central bank has spent more than half its foreign exchange reserves since 2011 in defending the currency, which is pegged to the dollar.



"The fluctuations in the exchange rate remain at normal levels given the political conditions and turmoil the country is experiencing and its negative repercussions on the economic situation," Qandil said.

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Official: Egypt to receive 1st tranche of $2.5 bn AfDB loan by year’s end

by admin
December 7th, 2012

The African Development Bank (AfDB) announced on Wednesday that it would provide Egypt with a $2.5 billion loan to help fund its budget deficit, bolster the national economy and finance specific development projects.
“Egypt will receive $500 million, representing the first tranche of the African Development Bank’s loan, by the end of December,” Samy Zaghloul, AfDB’s executive director for Djibout

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Finance Ministry: LE500 million sold in bonds

by admin
December 3rd, 2012

The Finance Ministry has sold LE500 million in 3-year treasury bonds (due to mature on 9 October 2015), it announced on Monday.

Bidding on 7-year treasury bonds (due to mature 13 November 2019) was cancelled in Monday’s sale.

The ministry posted on its website that the average cost of return for the bonds after three years is 14.113 percent, while the maximum return can reach 14.17 percent and the minimum return 13.9 percent.

Based on the current year’s budget, Egypt would need to borrow LE135 billion to cover its budget deficit. Many of the new bills and bonds being sold by the Finance Ministry are generating revenue to pay off old government securities whose maturity is overdue.

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Categories Egypt Economy
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IMF: Egypt must keep steady course for loan review

by admin
November 27th, 2012

The International Monetary Fund's board will require there is no major change in economic outlook or policy when it considers approving a US$4.8 billion loan to Egypt, an IMF spokesperson said.

The loan deal was agreed in principle this month with an IMF team in Cairo and the board is expected to meet to finalize the facility on 19 December.

Spokesperson Wafa Amr's remarks were made in an emailed response to questions about whether President Mohamed Morsy's decree to extend his powers would threaten the preliminary loan deal, seen as vital to rebuilding confidence in Egypt's economy.

His decree has set off a wave of protests and violence.

"Consideration of the agreement by the IMF Executive Board will require that there is no major change in the economic outlook and implementation plans," Amr said.

Egyptian officials have not indicated any shift in economic plans that include reining in the budget deficit from about 11 percent of gross domestic product in 2011/12 to 8.5 percent in the financial year that ends in June 2014.

When the preliminary agreement was reached, a member of the IMF team involved in the negotiations said he expected it would be approved by the board.

"The staff-level agreement on financial support from the IMF is based on the economic and social policies that the government plans to implement under its program," Amr said in reference to the initial loan deal that was announced on 20 November.

Amr said implementing those plans included passing a revised budget for 2012/13 that reflected planned tax and spending measures.

She said it also required "assurances from Egypt's bilateral and multilateral partners regarding their expected provision of program financing".

The IMF deal is expected to encourage investors and support from other nations for Egypt, whose economy has been hammered by political unrest since Hosni Mubarak was overthrown in 2011.

On the budget, Egypt initially forecast a deficit of about 8 percent of GDP for 2012/13, which economists said at the time of publication was optimistic. Since then, officials have said that target could not be met because reforms it was based on had not been implemented.

Egypt said it would issue a supplementary budget once a deal with the IMF was reached, and Planning and International Cooperation Minister Ashraf al-Araby said on Saturday the deficit for 2012/13 was now expected to be 10 percent of GDP.

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Egypt sees 2012/13 budget deficit at 10.4 % of GDP

by admin
November 26th, 2012

Egypt expects its budget deficit to be 10.4 percent of gross domestic product in the financial year ending June 2013, coming in below the 11 percent or so it reached in 2011/12, a minister said on Saturday.   The figure of 10.4 percent is well above the 8 percent or so originally forecast for 2012/13, but economists and government officials had said the original estimate was optimistic as it

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Budget deficit increases to LE 69.6 billion from July-October

by admin
November 25th, 2012

Egypt’s total budget deficit jumped to LE 69.6 billion, or about 3.9 percent of the country’s GDP, during the July-October 2012 period.

The number is a marked increase from the same period last year, when the total deficit of the state budget was LE47.2 billion.

According to a Finance Ministry report, state revenues increased by 13.5 percent during the four-month period, despite the increased deficit. This was the result of a 30.7 percent rise in tax revenues, which helped increase total revenues to LE72.8 billion, compared to LE64.1 billion last year.

However, the primary deficit to GDP rate had reached 1.4 percentage points during the same period, compared to 1 percentage point last year.

The report said that the rise in tax revenue was mainly the result of a 66.5 percent increase in income tax revenue to a record LE 22 billion. Property tax revenues also increased 42.2 percent to a record LE5.7 billion.

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Categories Egypt, Egypt Top Stories
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