Interpreting Middle East Economic News and Analyzing Market Trends

Egypt hopes to close budget deficit in the coming years, but how?

With all the negative economic news coming out of Egypt these days, one has to wonder how the government plans on getting out of the hole it’s in.  The Finance Ministry recently announced that it plans on lowering the budget deficit from 10.7% this year to 5.5% by 2016.  It’s good to see that the government is optimistic on reaching this target, but it is not known how it will get to it.  Read our earlier post Top 10 reasons why Egypt is headed for economic disaster to see why Egypt will not reach this target.

 

Here’s the article on Egypt’s budget deficit from Reuters:

Egypt hopes to lower its budget deficit to 5.5 percent in the 2016-1017 fiscal year from 10.7 percent in 2012/13, the finance minister told Egypt’s Al-Ahram daily newspaper on Saturday.

Egypt’s budget deficit will reach 197.5 billion Egyptian pounds ($28.7 billion) or 9.5 percent of gross domestic product in the fiscal year starting July 1 after a revised 184.9 billion pounds or 10.7 percent in 2012/13, according to a draft budget previously seen by Reuters.

The economy of the Arab world’s biggest state was badly hit by more than two years of turmoil following an uprising that ousted former President Hosni Mubarak, which raised the deficit, drained foreign currency reserves used to pay for imports and led to a currency crisis.

Egypt’s deficit cut is a crucial step to secure a $4.8 billion loan from the International Monetary Fund (IMF). The government plans to curb spending on fuel subsidies and introduce tax changes that would target the wealthy.

An IMF mission failed last month to conclude a loan deal over political and economic concerns but officials from both sides said talks were continuing. The IMF has urged Egypt to reduce energy subsidies to help shore up government finances.

Read the full article from Reuters.