Egypt’s economy grew 5.6% in the 2018/19 fiscal year and is “on the right track” as it completes IMF-backed reforms, Prime Minister Mostafa Madbouly said on Wednesday.
The budget deficit came in at 8.2% of GDP, he said in a statement after the weekly cabinet meeting, which was slightly below an official forecast of 8.4%.
Deputy Finance Minister Ahmed Kouchouk said the overall budget deficit this fiscal year was at 431 billion Egyptian pounds ($26 billion), equivalent to 8.2%, down from 9.7% last year.
Egypt is emerging from a three-year economic reform program tied to a $12 billion loan from the International Monetary Fund.
Madbouly said Egypt’s primary surplus stood at 2% for the fiscal year, which ended in June, and also pointed to a recent drop in inflation as positive signs. Economic growth was up from 5.3% in 2017/18 and in line with a government forecast.
“At the same time, it induces us to complete the implementation of reforms and the efforts exerted to achieve the targets for the new fiscal year,” Madbouly said.
Egypt has been praised by international lenders for swift reforms implemented since 2016, though austerity measures and inflation have left many Egyptians struggling to get by.
The reforms included a sharp devaluation of the currency, the introduction of value-added tax and the elimination of subsidies on most fuel products.
Madbouly said the IMF was due to vote on July 24 on the disbursement of the final $2 billion tranche of the 2016 loan.
The move follows Egypt’s decision this month to implement the final round of fuel subsidy cuts, which raised domestic prices by between 16% and 30% to bring them into line with their real cost.
Debt-to-GDP ratio down
Headline annual inflation dropped to 9.4% in June from 14.1% the previous month, though it is expected to rise over the rest of the summer as the impact of the latest round of fuel subsidy cuts kicks in.
Madbouly said the ratio of Egypt’s debt to GDP has declined to 90.5% in the 2018/19 fiscal year, from 108% the year before, and that the government was targeting a further drop in the current fiscal year to 82%.
Finance Minister Mohamed Maait, speaking at a joint news conference with Madbouly after the cabinet meeting, said the government was targeting a further drop in the 2010/21 fiscal year of around 70%.
“Today we are proud that in one year, we went from 108 to 90.5,” Maait said, referring to the debt-to-GDP ratio.
Egypt’s Planning Minister Hala al-Saeed, speaking at the same news conference, said Egypt will pay 160.5 billion Egyptian pounds annually to pension and insurance funds, with a compound interest of 5.7%.
Over five years, Maait estimated that Egypt will pay a total of 1.111 trillion Egyptian pounds to pension and insurance funds.
Madbouly said bolstering industry was a strategic goal for the government.
“I’m saying this because we still have a long way to go,” he said, referring to the positive indicators, adding that the government continues to aim for better indicators across the board.
He said Egyptians can see improved infrastructure, including roads and electricity, but that they expect more and want results faster, something he said the government is working towards.