Minister of Finance Mohamed Maait said in a statement on Friday that the general budget is more flexible in light of the severe world economic crises.
He added that the Egyptian economy was more resilient in the face of international challenges and has the ability to positively and flexibly deal with internal and external shocks thanks to the economic reform programme.
“The Egyptian economy was capable to absorb the impacts of the coronavirus pandemic, and it will be able to absorb the negative impacts of the Russian-Ukrainian war and the unprecedented inflation wave,” he affirmed.
The minister also stated that the government was keen to achieve financial discipline and to keep the safe economic course of the state despite the exceptional circumstances witnessed by various economies currently.
“The budget is expected to achieve an initial surplus of EGP 91 billion and to reduce the deficit of the total GDP to 6.2 percent and the debt ratio of budgetary agencies to 85 percent by the end of the current FY this June,” the statement read.
Maait added that the country’s financial performance in the past nine months witnessed tangible significant performance compared to the previous year despite the significant increase in expenditures to provide for all the needs of the state’s sectors.
“The annual growth in spending on health reached 24 percent. There was also an increase in governmental investments, including allocating EGP 80 billion to the Decent Life Presidential Initiative to develop the Egyptian countryside and EGP 16 billion for cash support as part of the Takaful and Karama Initiative with an annual growth rate of 23 percent, in addition to the payment of EGP 135 billion in dues for pension and insurance funds, and supporting food subsidies by EGP 50 billion,” the statement read.
Furthermore, the minister said that the total deficit during the past nine months from July 2021 to March 2022 decreased to 4.9 percent while maintaining a primary surplus and increasing proceeds from taxes by 12.8 percent as result of implementing a project to modernise and digitise the taxation system, which aims to integrate the informal economy into the formal one, limit the tax pool more accurately, and to collect the dues of the state’s public treasury.
Maait also said that the e-bill system was implemented successfully, which will allow the follow up of commercial transactions between companies through the exchange of invoice data in digital form, adding that the trial run of the system was launched in April 2022 to follow up on the commercial transactions between financiers and consumers in real time nationwide.
The minister’s statement comes after the US Federal Reserve’s (FED) decision on Wednesday to raise its benchmark interest rate by 0.5 percent — the largest increase in two decades — in an effort to curb the rising inflation.
The measure is expected to have major economic impacts on developing countries, like Egypt, as well as the developed world.
The Central Bank of Egypt (CBE) is scheduled to meet on Thursday 19 May to discuss the future of the interest rate in the country in light of the latest US decision, with experts expecting the CBE to raise the interest rate somewhere between 0.5 percent to 2 percent.
The FED’s decision is expected to place pressure on emerging market countries that will have to pay off their debts and their interests in dollars.
The rise in the value of the dollar in the wake of the FED’s decision will also affect imports and raise trade balance deficit.
In March, the FED increased interest rates by a quarter of a point.
A week later, the CBE raised the overnight deposit rate, the overnight lending rate, and the rate of the main operation by one percent (100 basis points) to 9.25 percent, 10.25 percent, and 9.75 percent, respectively.
In February, Egypt’s inflation rate reached its highest level in almost 30 months to surpass the CBE’s initial inflation target of 7 percent (±2 percentage points) by the end of 2022.
