Egypt Draft Budget Foresees Reducing Deficit to 7.9% of GDP

Egypt’s draft budget for the fiscal year that starts in July forecasts reducing the budget deficit to 7.9 percent of gross domestic product, Finance Minister Momtaz el-Saieed said, as the country seeks an International Monetary Fund loan.

The draft foresees spending of 537.7 billion Egyptian pounds ($89 billion) and revenue of 392.4 billion pounds, el-Saieed told reporters in Cairo today. Planning and International Cooperation Minister Fayza Aboulnaga told reporters today that the country targets a growth rate of 4 to 4.5 percent for the 2012/2013 fiscal year. She said the Cabinet will review the draft budget on May 16.

The economy expanded 0.4 percent in the three months through Dec. 31, compared with growth of 0.2 percent in the previous quarter and 5.6 percent a year earlier, according to official figures. Talks with the IMF for a $3.2 billion loan have yet to conclude amid wrangling between the interim government and Islamist-dominated parliament. Egypt requested the loan in January, as part of efforts to boost a struggling economy after last year’s uprising.

El-Saieed said the budget deficit target for next fiscal year was less than the 8.6 percent of GDP targeted in this fiscal year’s budget.

The draft budget cuts fuel subsidies by 25.5 billion pounds compared with the 2011/2012 budget to 70 billion pounds, el-Saieed said. It boosts food subsidies by 7.7 billion pounds to 26.6 billion pounds, he said.

After the draft budget is reviewed by Cabinet, it will be submitted to the head of the ruling military council to be referred to parliament, the state-run Middle East News Agency reported today.

The IMF has requested broad political support for a loan-related economic plan to ensure it is implemented beyond the transitional period. The military council says it will transfer power to civilians by the end of June.

The government’s proposed loan-tied measures include reducing the budget deficit through speeding up the implementation of a value-added tax and “rationing” fuel subsidies without harming low-income people, according to a statement by parliament’s economic committee last month.

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