Moody’s credit rating agency said that the renewal of the budget targets is the trend towards controlling public finances to pre-Corona levels, after the setbacks caused by the epidemic in the fiscal year 2020 and 2021 compared to the government’s expectations before the crisis.
She indicated that her expectations are broadly consistent with the government’s expectations, and that the combination of primary surpluses, lower interest cost and a return to higher than expected growth rates for the Egyptian economy paves the way for a renewed decline in debt rates as a percentage of GDP from levels higher than 90% of GDP according to Estimates of the debt at the end of the current fiscal year.
The Cabinet approved a draft budget for the fiscal year 2022, which aims to reduce the fiscal deficit to 6.6% of GDP from 7.8% in fiscal year 2021, and it expects an initial surplus of 1.5% of GDP. In fiscal year 2022, from about 0.9% in fiscal year 2021.
The government expects real GDP to expand by 5.4% in fiscal year 2022, from 3.3% in fiscal year 2021.
The budget data for the period from July to December 2020 confirms the government’s efforts to preserve revenue through the pandemic and gradually reduce interest payments as a share of GDP and revenue.
Savings give way to higher social spending in the new budget and the planned increase in the minimum wage without prejudice to the general fiscal consolidation trends.
The agency said that the state budget data from July to December confirm the government’s efforts to preserve revenues as well as the gradual reduction in interest payments as a proportion of revenues and gross domestic product.
She stated that these savings give way to higher spending on the social side, as well as the planned increase in the minimum wage without prejudice to the overall deficit.
She added that among the measures supporting revenues during the current fiscal year, the calculation of 1% tax on private and public wages exceeding two thousand pounds per month, but it will be completed next July, as well as the 0.5% that was deducted from pensions.
However, the government aims to increase tax revenues by 2% as a percentage of GDP over 4 years by strengthening revenues and customs administration, including electronic tax collection, in addition to preparing for more tax policy measures.
In terms of spending, and within the framework of the urgent package to confront the pandemic, 1.9% of the GDP was mobilized, including 1% to support the health and social sectors, and 0.9% were allocated to companies to support economic activity.
Takaful and Karama coverage increased to reach 3.6 million families benefiting, with an increase of 400,000 thin families, and it is targeted to reach 4 million families by the end of next June.
Moody’s said that the shift to targeted subsidies and the shift away from consumption-related subsidies is part of the comprehensive subsidy reform that was approved over the past four years, which greatly contributed to stabilizing public financial accounts in Egypt.
She stated that the central bank’s credibility in maintaining price stability before the pandemic and its active monetary policy during it contributed to targeting domestic returns in the long term and supported its expectations for a further gradual reduction in the interest bill.
She explained that the decline in the real interest rate supports the government’s objectives to extend the average life of government debt to 3.2 years by the end of 2020, compared to 1.3 years by the end of June 2013.
She noted that less reliance on short debt limits the need to re-extend debt and the government’s liquidity risk.
The article Moody’s: Egypt’s draft budget for next year confirms the trend to return to the pre-pandemic path, it was written in Al-Borsa newspaper