In a recent meeting, Mohamed Maait, Egypt’s minister of finance, revealed that the state will be placing an EGP1 trillion ($21.3 billion) ceiling on public investments in the upcoming fiscal year 2024-2025. All investment projects by state-owned entities will be subject to this limit, signaling a shift towards greater private sector participation in the economy.
Moreover, Egypt plans to adopt a new strategy to decrease public debt, which cannot be surpassed without the approval of the president, cabinet, and parliament. Furthermore, it will impose a limit of guarantees during the upcoming fiscal year in an effort to decrease external debt.
Maait also revealed that, in the next three years, Egypt aims to reduce the debt-to-gross domestic product (GDP) ratio to less than 80 percent. Moreover, it will utilize the primary budget surplus and 50 percent of revenues from its initial public offering (IPO) program to reduce government debt and its service burdens.
Cautious economic measures
Maait emphasized Egypt’s adoption of sustainable and cautious economic policies to mitigate internal and external shocks. The government aims to balance economic recovery measures and financial discipline while addressing inflationary pressures and enhancing citizens’ living standards. Moreover, Egypt will focus on securing strategic reserves of commodities to meet citizens’ basic needs. Furthermore, the new draft budget allocates more than EGP40 million for Takaful and Karama, Egypt’s social support programs.
Besides, Egypt’s efforts to release $14.5 billion worth of goods stranded at ports aim to bolster commodities available in local markets, ensuring stability and affordability for consumers. The draft budget for 2024-2025 also allocates EGP596 billion in subsidies for food and petroleum products.
Egypt’s ambitious economic targets
Egypt is aiming for ambitious targets in the upcoming financial year, including achieving its largest surplus of 3.5 percent and reducing the overall deficit to 6 percent of GDP in the medium term. The draft budget also outlines significant public expenditures (EGP3.9 trillion) and revenue forecasts (EGP2.6 trillion) with a focus on maximizing tax revenue, supporting exports and encouraging investment expansion.
Maait added that Egypt aims for EGP2 trillion in tax revenues while emphasizing that it will not add new burdens on citizens or investors. Hence, it aims to integrate the informal economy and streamline tax systems.
Finally, Maait stated that Egypt’s 2024-2025 draft budget allocates EGP23 billion to support exports and encourage investors to grow exporting activities.
Read: S&P upgrades Egypt’s credit outlook to positive
Future outlook
Egypt’s recent deals with the International Monetary Fund, the World Bank, and the European Union signal an optimistic outlook for economic recovery. Moreover, the recent measures Egypt has taken to support its economy, particularly freeing the pound’s exchange rate, will eliminate the black market and strengthen the government’s efforts to reduce inflation. Moreover, it will stimulate GDP growth and support the government’s fiscal consolidation agenda over time.
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