Minister of Finance Amr El-Garhy said Wednesday that the cabinet has finalised the state budget draft for the new fiscal year (FY) 2016/2017, and it was sent to President Abdel Fattah Al-Sisi for approval.
The new state budget will be submitted to parliament Thursday evening.
During a press conference held Wednesday at the cabinet headquarters, El-Garhy said the new state budget draft targets a deficit of 9.9% and a growth rate of 5.2%.
The government has estimated the revenues for the next FY at EGP 627bn, of which EGP 433bn are tax revenues. Expenditures are projected to be EGP 936bn, compared to EGP 829bn expected by the end of the current FY.
The minister is counting on a growth in revenues after the implementation of the value-added tax law, which is currently under discussion in parliament.
However, the minister expected that the debt will jump to EGP 290bn by the end of the coming FY, compared to EGP 244bn by the end of the current FY.
According to El-Garhy, the Ministry of Finance valued the dollar in the new budget at EGP 9, while the crude oil benchmark will record $40 per barrel.
El-Garhy, who assumed his post as minister days ago, said the current FY will witness an increase in the budget deficit, to reach 11.5% compared to the 8.6% target. He further noted that he expects public debt to record EGP 2.9tn by the end of the current FY.
He attributed the increase in the budget deficit and debt in the current FY 2015/2016 to the recent rise in interest rates, which increased the cost of government borrowing. He also attributed it to the delay in issuing the value-added tax law.
The government estimated the value of wages in the new budget at EGP 228bn, and total investments in the budget at EGP 107bn, while allocating EGP 210bn for subsidies.
The government aims to increase the rate of savings in the new budget to 9%, compared to 6.6% in the current FY’s budget.
Minister of Planning Ashraf El-Araby said the government has not yet made a final decision with regards to borrowing from the International Monetary Fund (IMF) to bridge the financing gap, which he estimated at $10bn by the end of the current FY.
El-Araby said petroleum and electricity subsidies will be reduced in the new budget by about EGP 25bn. He explained that borrowing from the domestic market to finance the budget deficit is not preferred, but it is the faster and more realistic alternative at the moment. He pointed out that the government is open to all funding channels; both internally and externally.
El-Araby also said the total investments in the new budget will amount to EGP 531bn, constituting 16.5% of the GDP compared to 14.5% in the current budget. This rate is expected to jump to 18% and 19% in FY 2017/2018.
The total investments, which are estimated at EGP 531bn, are distributed as follows: EGP 292bn from the private sector, EGP 107bn from the state treasury, EGP 83.2bn from the public sector, and EGP 48.7bn from economic bodies.
The minister estimated that the economy will grow by 4% by the end of the current FY 2015/2016, to increase to 6% by FY 2017/2018.
He said the GDP will record EGP 3.2tn in FY 2016/2017, compared to EGP 3tn for the current FY.
The minister estimated investments in oil and natural gas in the new budget at EGP 49bn.
The government aims to reduce unemployment rates to below 11% in the new budget.
