News Analysis: Egypt's new budget indicates positive results of economic reform

by Marwa Yahya

CAIRO, March 25 (Xinhua) -- Egypt's new budget of the fiscal year 2018-2019, the largest in the country's history, has indicated positive results of the ongoing economic reform, according to economic analysts.

The Egyptian government has approved the budget for the fiscal year that starts on July 1 and concludes on June 30 aiming at GDP growth of 5.8 percent compared to 5.2 percent set in the 2017-2018 budget.

Valued at 1.412 trillion Egyptian pounds (nearly 80 billion U.S. dollars), the new budget aimed to decrease the state's budget deficit to 8.4 percent of the GDP, as well as achieving a primary surplus.

"The government, in the new budget, has adopted the same approach from the previous year of solving the Egyptian economic problems by increasing the economy volume," said Waleed Gab-Allah, professor of financial and economic jurisdictions at Cairo University.

Egypt has been experiencing a status of economic deflation and rise of unemployment rates, and the government attempted to expand the investments and to increase the gross volume of economy to reach the highest levels of employment, Gab-Allah told Xinhua.

He noted that reducing rates of unemployment and achieving highest levels of growth is "the basic guarantee of improving the citizen's living conditions."

He added that reaching the targeted growth level of 5.8 percent means large increase in the national income that will be reflected "in some way or another" on the citizens' welfare after developing the social protection programs.

The 2018-2019 budget also targets reduction of unemployment rates to 10.4 percent and inflation to 13 percent.

The new budget is due to be presented to parliament for final approval at the end of the month.

The World Bank said in October that it expected Egypt's budget deficit would ease to 8.8 percent in the 2017-2018 fiscal year.

Finance Minister Amr El-Garhy had said in January that the government is on track to achieve a targeted primary surplus of 0.2 percent of GDP by the end of fiscal year 2017-2018.

As for the debt, the target of fiscal year 2018-2019 is set at 97 percent of GDP, and 88 percent of GDP the following year.

"The government has reached positive and better-than-expected results since application of the economic reform program, which have been praised by the international institutions," the economic expert added.

He explained that targeting increase of economy volume, expenditures and investments in many projects, along with garnering the fruits of the old projects of fish plantation and desert reclamation in particular, will help achieve food security for the citizen.

He described the new budget as "ambitious," but cautioned "the government still needs more for developing the social protection programs."

Maximizing the economy volume indicated confidence of international institutions, and success of the tough economic reform measures, Gad-Allah illustrated.

Egypt has been facing economic recession over the past few years due to political turmoil and relevant security issues, which led to declining tourism and foreign investments amid growing budget deficit, inflation rate and foreign and domestic debts.

To face economic challenges, Egypt started in late 2016 a three-year reform program including subsidy cuts, tax hikes and full floatation of the local currency.

Egypt's economic reform program is encouraged by a 12-billion-dollar loan from the International Monetary Fund, half of which has already been delivered to the most populous Arab and North African country.

Egypt's foreign currency reserves exceeded 38.2 billion dollars by the end of January, the highest since the uprising that ousted former President Hosni Mubarak in January 2011 when it stood at 36 billion dollars.

"The new budget doesn't suffer a problem of funding because there is diversity of tools of funding, like international loans and subscribing shares in the shock market," Gad-Allah said.

Egyptian Premier Ismail said last week the government will offer shares of 20 state companies in 18 months, ten of which are already listed on the stock market.

He said the new procedures aimed at activating the stock market, providing funds necessary for establishing projects, restructuring the state's companies, and saving direct and indirect revenues for the state's budget.

Meanwhile, Ihab al-Desoqy, chairman of the Economic Department at Cairo-based Sadat Academy for Administrative Sciences, believed the targets of the new fiscal year budget is "indeed ambitious but very difficult to be achieved."

He told Xinhua that the new budget, aiming at reducing the total deficit to 8.4 percent, is not easy to be reached in light of the large volume of financial obligations that should fund the debt.

He sees increasing the taxes in the coming budget is a significant measure to overcome the negative repercussions of the debts on the economic recovery. Enditem