Egypt’s deficit looks set to widen this fiscal year, countering projections the government has made in high-profile policy documents.
According to figures released by the Ministry of Finance, Egypt’s deficit reached LE167.8 billion (5.9 percent of GDP) in the first half of the 2015/16 Fiscal Year, a period spanning July-December 2015. During the same period in the 2014/15 Fiscal Year, the deficit stood at LE132 billion, or 5.4 percent of GDP. That year closed with a deficit of LE268.2 billion, or 11.5 percent of GDP.
By contrast, Egypt’s recently-released sustainable development plan projects that the deficit will narrow to 7.5 percent by 2020 and 2.28 percent by 2030.
The deficit so far this fiscal year has driven by an increase in spending, which rose 21 percent year-on-year to reach LE349.9 billion. One of the primary factors in the increase was an 8.4 percent rise in the public sector wage bill, which reached LE105.6 or 3.7 percent of GDP. The Finance Ministry emphasized that this is the smallest rate of increase during the last three fiscal years, but it comes at a time when the government is supposed to be controlling its spending.
In the policy document accompanying the World Bank’s budgetary support loan, Egypt is targeted to reduce the wage bill from 8.2 percent of nominal GDP last fiscal year to 7.5 percent by the 2017/18 Fiscal Year.
Meanwhile, government revenue has failed to keep pace with spending, rising by a comparatively low 17.5 percent to reach LE192.2 billion (6.8 percent of GDP).
Egypt has shown an increase in tax receipts, which were up by 20.9 percent to reach LE137.9 billion (5.9 percent of GDP). Almost two-thirds of this figure came from taxes on goods and services: Egypt’s General sales tax on goods netted LE27.7 billion, while taxes on tobacco brought in LE16.5 billion. By contrast, taxes on domestic salaries brought in just LE12.5 billion, while property taxes brought in LE12.1 billion, the vast majority from interest on treasury bonds and bills.
Here, Egypt is behind target for the projections laid out in the 2015/16 general budget. Halfway through the year, Egypt has collected less than a third of the LE422 billion in taxes the budget calls for, while total revenue for the first half of the fiscal year is just 30 percent of the LE622 billion the budget predict.
On the expenditure side, the government has already spent more than 40 percent of its allocated budget of LE864.6 billion, and nearly half of the funds allocated for the wage bill.