Egypt’s Finance Minister Amr El-Garhy announced the results of the budget during the first half (H1) of the fiscal year (FY) 2017/2018, on Sunday. The results show a decrease in the primary deficit to register EGP 14bn, which represents 0.3% of GDP, down from EGP 39bn, or 1.1% of the GDP during the same period in FY 2016/17, which makes it the lowest primary deficit recorded in more than a decade.
El-Garhy explained in a press statement that the results show that Egypt is capable of achieving the financial targets of FY 2017/18, to achieve a primary surplus of 0.2% of the GDP for the first time in several decades. The improvements came as a result of the fiscal adjustment of the public budget and the continuing implementation of financial and economic reforms.
The statement highlights the improvement in curbing the total deficit to 4.4% of the GDP, from 5% in H1 2016/17, due to the reduction of energy subsidies and increasing the value added tax (VAT) frrom 1% to 14%. Those developments led to an increase in revenue during H1 2017/18 by 38%, which exceeded the annual growth rate in general expenditure by 25%.
“There is a good chance that the government will achieve a primary surplus in FY 2017/18, as the second half of the year is typically more favourable in terms of revenues, due to the tax collection season in the period between March and May,” said Mohamed Abu Basha, leading economist at Cairo-based investment bank EFG-Hermes.
Moreover, tax revenues grew by about 61% compared to 12% during the previous year. The main driver behind the growth was the significant increases witnessed in taxes on commercial and industrial activity (an annual growth rate of 71%), the income tax (an annual growth rate of 24%), and the VAT (an annual growth rate of 80%).
On the other hand, an increase was witnessed in social solidarity allocations, while commodities subsidies increased by 65% to account for EGP 23.3bn during H1 FY2017/2018, after increasing the value of subsidies for owners of ration cards by about 140%. At the same time, cash support allocations for the Takaful and Karama social programmes increased by141% to EGP 9.9bn.