Egypt's Budget Deficit Beats Government Targets as Tax Returns Rise
Egypt’s budget deficit beat the government’s target for the fiscal year through June after tax returns increased, the finance ministry said today.
Initial figures show that the shortfall widened to less than 8.3 percent of gross domestic product, below the government’s target of 8.4 percent, the Cairo-based ministry said in an e-mailed statement. The deficit was 6.9 percent in the previous year.
Egypt’s tax revenue for the fiscal year through June rose to 148 billion Egyptian pounds ($26 billion), a 6 percent increase on the previous year, the ministry said.
“Income tax came slightly ahead of our expectations and so did revenue from customs,” Mohamed Abu Basha, an economist at Egyptian investment bank EFG-Hermes Holding SAE, said in a telephone interview. He had forecast a deficit of 8.1 percent.
Revenue declined to 269 billion Egyptian pounds, compared with 282.52 billion the previous year, though it exceeded the government’s forecasts by 1.2 billion pounds, the ministry said. Expenditure met its target of 367 billion pounds.
The government expects the economy of the most populous Arab country to have grown about 5.3 percent in the fiscal year through June, compared with 4.7 percent the previous year.
Growth is still below the average of 7 percent achieved in the three years to June 2008, after the global financial crisis hurt revenue tourism, foreign direct investment and revenue from the Suez Canal.
“Recovery is progressing much faster than anticipated,” Finance Minister Youssef Boutros-Ghali said in the statement. “We were able to secure a decent growth, and we were also able to outperform our deficit and debt targets in the midst of one of the worst systemic global financial and economic crises.”
The ministry aims to bring the shortfall to about 3 percent by 2015 and to lower the debt-to-GDP ratio to 60 percent from as much as 82 percent.
“The measures that they announced to bring the deficit to 3 percent are reasonable to a large extent,” said Abu Basha. “But the question is whether they will execute them and how effective will they be.”
Among these measures are the introduction of a value added tax and efforts to improve tax collection, which remains “very weak,” he said.
Egypt’s benchmark EGX30 stock index has lost 4.7 percent this year, according to Bloomberg data. Orascom Construction Industries, a company that undertakes infrastructure projects with the government, has shed 10.3 percent.