Cabinet approves FY17/18 budget, targeting first primary surplus in a decade
Cabinet approved the FY17/18 budget on Wednesday, targeting a 9.1% of GDP deficit (EGP370bn) vs. an expected deficit in current FY16/17 of between 10.5-10.7%, according to Minister of Finance Amr El-Garhy. The budget is targeting 4.6% real GDP growth. State revenues are expected to grow 27% Y-o-Y to EGP818bn, driven mostly by a 31% Y-o-Y increase in tax revenues to EGP604bn. Spending is budgeted to increase 19% Y-o-Y to EGP1,188bn, with energy subsidies to remain nearly flat Y-o-Y despite a weaker currency estimate in a hint of expected subsidy cuts, in our view. Spending includes a subsidy bill of EGP331bn, wage bill of EGP240bn and purchases of goods and services bill of EGP47bn. With growth in revenues outpacing that of spending, the government is budgeting for Egypt’s first primary surplus (0.3% of GDP, EGP11bn) in a decade. The budget assumes an oil price of USD55 per barrel and an exchange rate of EGP16 to the dollar. Egypt’s financing plan for the coming year will include a return to international markets by end of 2017 or early 2018, he said. The budget will be submitted to President Sisi and then to Parliament by Friday. If approved, the budget will be signed into law by the President.
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