Egypt’s budget deficit widened to LE230.9 billion at the end of April, equivalent to 9.9 percent of GDP, according to the Finance Ministry’s May bulletin.
Egypt’s budget for the 2014/15 fiscal year, which ends June 30, calls for a deficit just shy of LE240 billion, or 10 percent of GDP.
In fiscal year 2013/14, the budget deficit stood at LE163.3 billion, or 8.2 percent of GDP, by the end of April. The financial year closed with a budget deficit of around LE255 billion, or 12.8 percent of GDP.
Breaking down the numbers
In absolute terms, revenue grew slightly year-on-year, reaching LE321 billion from July 2014-April 2015, compared to LE314.8 billion in the same period the year before. However, as of April 2015, revenue was 13.8 percent of GDP, compared to 15.8 percent the year before.
Overall, tax revenue rose by 22.6 percent to reach LE239 billion.
Taxes on goods and services showed the strongest growth, up by more than 35 percent to reach 97.5 billion. The gains were driven by increased sales tax, excises on goods like tobacco, and increases in stamp taxes for electricity, natural gas and other goods and services.
An increase in sales tax collection is generally a sign of increasing economic activity. This type of tax also tends to disproportionately affect poorer households, who by necessity spend a greater percentage of their earnings on consumer goods.
During the same period, the government collected LE18.2 billion in taxes on wages and LE8.4 billion in taxes on industrial and commercial profits.
“The government is working towards restructuring the tax system to allow for a fair distribution of the tax burden,” the report notes.
Gains in tax revenues were partially offset by a decline in non-tax income. The decline was driven by a drop in grants, which the Ministry says dropped to LE7.9 billion, compared to LE51.4 billion the year before.
The increase in government spending was driven by public sector wages, debt service and subsidies, grants and social benefits.
The public sector wage bill climbed by 13.5 percent to reach LE157.8 billion, while interest payments grew by more than 11 percent to hit LE140.7 billion.
Spending on subsidies grants, and social benefits reached LE145 billion, compared to LE128 billion in the same period last year.
Subsidies to GASC, the agency that supplies wheat and other food commodities, grew by 27 percent to hit LE26 billion. Electricity subsidies almost doubled, hitting LE22.4 billion.
The government spent LE36.7 billion on social benefits, including pensions, an increase of 16.6 percent over the same period last year.
With the government continuing to spend more money than it brings in, public debt rose to almost 2.18 billion at the end of March 2014, compared to LE1.8 billion a year earlier.
More than LE1.99 trillion of that debt is owed to domestic creditors, including bond-holders and local banks.