Egypt expects spending to rise by 15 per cent in its draft budget for the fiscal year that starts on July 1, as the country grapples with the economic fallout of the Russia-Ukraine war and the sustained effects of the Covid-19 pandemic, its finance minister said on Monday.
The spending increases will support the sectors and groups most affected by the repercussions of the current global economic crisis, Mohamed Maait told Parliament.
“We are able together — the leadership, the government and the people — to overcome this exceptional ordeal and turn it into promising opportunities for progress and development in our new republic,” he said, according to an Egyptian Cabinet statement.
Expenditures in the 2022-2023 fiscal year will total 2.07 trillion Egyptian pounds ($112 billion) from a projected 1.79tn pounds in the 2021-2022 fiscal year.
Revenue will increase from 1.3tn pounds to 1.52tn pounds, resulting in a deficit of 558.2bn pounds — 14.5 per cent higher than the current fiscal year.
The global economy has been adversely affected by soaring food and energy prices as well as supply chain disruptions following Russia’s invasion of Ukraine in February.
Last month, the International Monetary Fund lowered global growth projections for 2022 and 2023 to 3.6 per cent, down 0.8 and 0.2 percentage points from its January forecast. The World Bank also cut its global growth forecast to 3.2 per cent from 4.1 per cent.
As Egypt’s fiscal year runs from July to June, the war is likely to have a more significant impact in the next fiscal year than in the current one.
The IMF expects the Egyptian economy to expand 5.9 per cent in the current fiscal year, but lowered growth prospects for 2022-2023 to 5 per cent from the previous 5.6 per cent forecast.
Egypt is the world’s top wheat importer, with Russia and Ukraine previously accounting for about 80 per cent of its total wheat imports.
In addition to rising inflation, the Arab world’s most populous country is suffering from decreasing foreign currency reserves and tourist inflows.
To mitigate the economic shocks, in March, Egypt introduced a 130bn-pound relief package, raised interest rates, let its currency weaken by more than 15 per cent and asked the IMF for support.
Gulf states have pledged about $22bn in investments and central bank deposits to help Egypt weather the crisis.
Egypt aims to reduce the budget deficit to 6.1 per cent of the gross domestic product during the next fiscal year, down from an estimated 6.2 per cent in the current financial year.
Budget allocations include 356bn pounds for support and social protection, as well as 400bn pounds towards wages — an increase of 43bn pounds from the current fiscal year to finance raises and bonuses for 4.5 million state employees.
The government will also increase the personal tax exemption limit from 9,000 pounds to 15,000 pounds.
More than 90bn pounds will be earmarked to support food commodities and subsidised bread for about 71 million of the country’s 103 million citizens.
Egypt aims to increase wheat production to meet 65 per cent of its consumption needs by 2025 from 45 per cent in 2020, Minister of Planning and Economic Development Hala El Said told Parliament on Monday.
It is also looking to raise oil seeds production to meet 10 per cent of its consumption by 2025, up from 3 per cent in 2020.