Egypt’s state budget deficit narrowed to 5.17 per cent of gross domestic product (GDP) in the July-April period of the fiscal year 2021/22, data from the Ministry of Finance showed. The 10-month budget deficit is compared to 5.48 per cent of GDP in the correspondent period a year earlier.
Revenues rose by 9.8 per cent to LE918.56 billion ($49.6 billion), up from LE836.42 billion between July 2021 and April 2022, while expenses increased by 10.2 per cent to LE1.33 trillion, according to Finance Ministry data.
Such figures draw an optimistic outlook about the country’s financial position in the fiscal year 2022/23, which will begin on July 1. The Moustafa Madbouli-led government aims at reducing the budget deficit to 6.1 per cent of GDP and a primary surplus of 1.5 per cent in the fiscal year 2022/23.
The Cabinet will continue supporting the nation’s productive sectors and vulnerable social groups most affected by economic crises. It will also carry on with efforts aimed at improving the quality of infrastructure across the country. The objective is to make sure that large segments of society benefit from improved services and high-quality facilities.
Key assumptions
In a previous article on the state budget, I pointed out that the government drafted the state budget for the fiscal year 2022/23 on a number of key assumptions, i.e. 5.5 per cent real GDP growth rate, nine per cent expected inflation rate, and 14.5 per cent average interest rate on T-bills and bonds.
Moreover, the state’s financing gap is estimated at LE1.52 trillion (around $83 billion) in the fiscal year 2022/23, according to Finance Ministry data.
The government expects public expenses to jump by 15 per cent to LE2.07 trillion in the fiscal year 2022/23. The state’s revenues are estimated to hit LE1.52 trillion, according to Finance Ministry data. Taxes will account for roughly 76.8 per cent of total revenues.
The fiscal policy should be investment-led to stimulate corporate demand in the medium and long terms. In this regard, the government expects public investments to total LE1.45 trillion in the fiscal year 2022/23, Minister of Planning and Economic Development Hala el-Saeed said on May 9.
Expansionary policy
The integration of the monetary and fiscal policies is a must to speed up economic growth, close the gap in Egypt’s finances and achieve sustainable development in the long run.
The state budget, taxation and government spending should be intertwined with the monetary orientation and the nation’s economic objectives as a whole.
To speed up the economic growth rate, the fiscal policy should be investment-led to stimulate corporate demand in the medium and long terms.
To this end, the government is tipped to embark on an expansionary fiscal policy to boost the economy through extra funds for financing infrastructure projects, thus creating more jobs and pushing growth ahead.
Moreover, there should be partnerships with the private sector in this regard. Sustainable development shouldn’t be funded by the government alone as the private sector should partner the state in these endeavors.
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