Egypt eyes 5.8pc growth, 10pc budget gap in 3 years

July 03, 2014 - 1:10:30 am

CAIRO: Egypt is targeting economic growth of between 4 and 5.8 percent within the next three years while holding the budget deficit at 10 percent of economic output, Finance Minister Hany Kadry Dimian said yesterday. 

“It is expected that growth will rise gradually to between 4-5.8 percent within the next three years,” he said.

That would be a marked acceleration from 2.1 percent in the fiscal year ending June 2013 and the rate above 3 percent targeted this fiscal year. New President Abdel Fattah Al Sisi has said growth should reach 7 percent by June 2018.

Dimian said he expected the budget deficit to stay at around 10 percent of gross domestic product in the next three years “as we expect the additional spending on health and education will offset the effects of the annual reforms in energy (subsidies).”

A 2014-15 budget announcement on Monday unveiled deep cuts in energy subsidies aimed at shrinking Egypt’s budget deficit, which has swelled since a popular uprising ousted autocrat Hosni Mubarak in 2011. 

Elected in May, Sisi has said he aims to cut the deficit to 8.5 percent of GDP by June 2018 from 14 percent in June 2013. After three years of political turmoil including the ouster of two presidents, Cairo needs to find additional sources of revenue and curb spending on food and energy subsidies which have traditionally eaten up a quarter of state spending.

As well as cutting planned energy subsidies by 40bn Egyptian pounds ($5.59bn) in the fiscal year that began July 1, the government has introduced new taxes including a temporary 5 percent tax on the wealthy over three years. 

Spending on health is due to increase by 22.7 percent to 51.7bn pounds this year, and education spending by 13.3 percent to 105.3bn pounds, as the government seeks to fulfil social justice pledges written into the newly approved constitution.