Egypt's ambitious financial outlook

Egypt’s draft budget for 2019-20 is with the House of Representatives, the lower house of the country’s parliament, for approval after having passed cabinet scrutiny. The House has three months to deliberate on the document before it is signed into law before the new fiscal year begins on 1 July.

The new budget targets a six per cent GDP growth rate, up from a projected 5.6 per cent rate in the current fiscal year. It also increases public investment by 40 per cent to reach around 13 per cent of total expenditure. It hopes to cut public debt to 89 per cent of GDP from around 98 per cent today.

It hopes to achieve these targets through improved revenues, with the Ministry of Finance targeting a 13.5 per cent rise in tax revenues in the upcoming fiscal year.

The ministry forecasts that receipts from taxes will reach some LE860 billion, up from LE755 billion in the current fiscal year, according to the ministry’s preliminary budget statement released on Monday.

Total revenues are anticipated to increase by 17 per cent to around LE1.1 trillion, with non-tax revenues expected to increase by 30 per cent to reach around LE280 billion.

The government could achieve the targeted revenues given the forecasts of increased growth and the subsequent rise in taxes from the business sector, said Hani Farahat, head of research at CI Capital, an investment bank.

Radwa Al-Sweify, head of research at Pharos Holding, an investment bank, said the government’s plan to restructure the Egyptian Tax Authority would lead to an increase in tax revenues and its attempts at formalising the informal sector would also increase the amount of taxes collected.