A number of financial and economic challenges will face Egypt in the fiscal year 2022/23, to begin on July 1, requiring policy coordination as well as a set of monetary and fiscal measures to cushion the negative repercussions emanating from the Russia-Ukraine war.
The government has recently 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.
Another key assumption is the price of Brent crude, which the government estimated at $80 per barrel in the fiscal year 2022/23, up from $75 in the 2021/22 budget, according to data from the Ministry of Finance.
The government also forecast the price of US grain at $330 per tonne, up from $300, and LE820 for an ardeb (one ardeb equals 150kg) of local wheat.
According to Finance Ministry data, the state’s financing gap is estimated at LE1.52 trillion (around $83 billion) in the fiscal year 2022/23.
Financial priorities
The global economic woes emanating from the repercussions of the Covid-19 pandemic and the Russia-Ukraine conflict have already impacted the state’s public finances with the state budget deficit widening to 5.15 per cent of GDP in the July-February period, data from the Ministry of Finance showed.
There’s no alternative to narrow the gap in the state’s finances, but to increase public revenues, while simultaneously decreasing state outlays. While expenses are expected to increase to LE2.07 trillion in the fiscal year 2022/23, against LE1.83 trillion a year earlier, revenues are forecast to total LE1.5 trillion in the fiscal year 2022/23, up from LE1.36 trillion in the previous year.
The government is betting on higher revenue from taxes, which are expected to total LE1.16 trillion in the fiscal year 2022/23, compared to LE983 billion, according to Finance Ministry data.
Countermeasures
The government has boosted social protection programmes to ease the impact of the Russia-Ukraine war on the man in the street. It has earmarked a total of LE355.9 billion in the fiscal year 2022/23 for subsidies and social protection, against LE321.3 billion in the 2021/22 fiscal year.
As part of structural reforms, President Abdel Fattah El Sisi, has instructed to strengthen the role of the private sector in the national economy and bolster the local industry.
To that end, the government is expected to exit from certain sectors within the coming three years, Prime Minister Moustafa Madbouli said last week.
Structural reforms are designed to complement Egypt’s economic reform programme, which was launched in November 2016 after floating the pound. Structural reforms include the development of the business environment, maximizing the role of the private sector and diversifying the productive structure of the economy.
The reforms also include raising the efficiency of vocational training, and improving the human capital in terms of education, health and social protection, as well as the boosting of financial inclusion and the enhancement of public institutions and governance.
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