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Egypt Plans Austerity Measures to Reduce Budget for Fiscal Year

Jan. 8 (Bloomberg) -- Egypt plans to cut expenditures in this fiscal year’s budget through reducing bonuses for administrative employees by 10 percent and by lowering goods-and-services spending 3 percent, according to an e-mailed Finance Ministry statement today.

“It was decided to prohibit the purchase of non-domestic products unless strictly necessary, in light of placed allocations” and without affecting the reserves of basic goods, the statement cited Finance Minister Momtaz El-Saieed as saying. Advance payments of sealed contracts contributing to the country’s investment projects are not to exceed 25 percent of the contracts’ value, El-Saieed said, according to the statement.

Egypt aims to reduce spending as it seeks aid from the International Monetary Fund. Prime Minister Kamal el-Ganzouri announced plans last month to reduce public spending by about 20 billion pounds ($3.3 billion). Finance Minister Momtaz El-Saieed said Jan. 2 that he will stick to a budget deficit target of 8.6 percent of economic output in the fiscal year that ends June 30. He also raised natural gas and electricity prices for energy-intensive industries by about 33 percent.

Egypt’s reserves tumbled after the revolt that toppled former President Hosni Mubarak in February. Foreign investors sold $7.5 billion of Egyptian treasury bills and bonds through the end of September, according to central bank data.

To contact the reporter on this story: Abdel Latif Wahba in Cairo at alatifwahba@bloomberg.net Dahlia Kholaif in Kuwait at dkholaif@bloomberg.net

To contact the editor responsible for this story: Shaji Mathew at shajimathew@bloomberg.net

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