The additional appropriation of EGP 80bn to Egypt’s budget for fiscal year (FY) 2019/20 did not affect that FY’s total deficit, Minister of Finance Mohamed Maait said on Monday.
He explained that the Ministry of Finance has taken several measures to ensure that the state treasury will not bear new financial burdens in the coming years.
The minister added that the additional appropriation has contributed to significantly reduce the debt service for the current and coming FYs, benefiting from the lower interest rate on local debt instruments compared to the prevailing rates in previous years, and the increase in the average life of the public debt.
There has also been an additional acceleration in the resolution of a large number of financial entanglements with the Ministries of Petroleum and Mineral Resources, and Electricity and Renewable Energy.
This falls in line with the state’s efforts to achieve rational management of financial transactions between various government agencies and to reduce the burden on public finances.
Maait indicated that, through this additional appropriation, additional financial space was made available to finance the repayment of “zero coupon” bonds for some local banks before their maturity date.
The move comes in light of the significant decline in interest rates on local securities. Most of the amounts owed to these local banks have been reissued in the form of new bonds for a period of over two years. The commensurate interest rates are lower than the existing bonds by about 6%, contributing to reducing the cost and burdens of servicing the debt of public budget agencies.
It is also working towards extending the life of the debt to help create an additional financial space. The space allows for the financing of social protection and human development programmes, foremost among which is the development of Egypt’s health and education systems.