Egypt’s budget deficit fell to 2.4 percent of Gross Domestic Product (GDP) in the first three months of fiscal year 2016/17, compared to 2.8 percent in the same period last year, amid subsidy cuts and reduced government spending.
The monthly report by the Finance Ministry, published on Thursday, shows a drop in the deficit despite a fall in state revenues, due to a 15.4 percent reduction in government expenditure — which reached 5.3 percent of GDP in the first quarter of 2016/17, compared to 6.1 percent of GDP in the same period last year.
Egypt embarked on a fiscal restructuring program in mid 2014, raising taxes and cutting energy and electricity subsidies in an attempt to pull back a growing budget deficit.
The authority responsible for the buying of grain and commodities indicated a reduction in their spending during this period, which can be attributed to fluctuations in wheat purchases as well as subsidy cuts.
The report asserts social benefits actually grew by 9.2 percent in the first quarter of 2016/17, despite inflation increasing by 14.1 percent in September.
State interest payments increased by 12.8 percent to reach LE57.2 billion, purchases of goods and services increased by 10 percent, and wages were almost stagnant, with a rise of just 0.1 percent, according to the report.
The government received fewer financial grants in the three months from July to September, from LE2.6 billion to LE100 million, leading to a large reduction in state revenues. Additionally, fewer taxes were collected in the first quarter of this fiscal year than during the same period last year, due to a 15.3 percent decline in income tax and capital gains tax, while property and sales taxes increased by 35 percent and 7 percent respectively.
Prime Minister Sherif Ismail told Reuters that Egypt’s economy grew by 4.3 percent in fiscal year 2015/16, while the budget deficit hit 12.1 percent.