Egypt’s Fiscal Performance in the Second Half of 2023

Egypt’s Minister of Finance, Mohamed Maait, announced that the country’s budget achieved a primary surplus of 150 billion Egyptian pounds ($4.9 billion) in the second half of 2023. Minister Maait stated that the total deficit for this period amounted to 4.95 percent of the gross domestic product (GDP). A primary budget surplus, which excludes interest payments on debt, is considered an indicator of fiscal health.

The figures presented by Minister Maait cover the first six months of Egypt’s spending plans for the 2023-2024 fiscal year. Revenues during this period saw an annual increase of about 41.6 percent, with total tax revenues growing at a yearly rate of 43.4 percent, and other revenues registering a growth of 36.4 percent.

Minister Maait highlighted the rise in wages and salaries, taking into account recently approved increases. Adequate allowances were allocated for support and social protection programs, including payments to the Insurance and Pension Fund and subsidies for food commodities. Spending on the health and education sectors was also emphasised.

Despite an overall improvement in expenditures during this period, the finance minister noted a rise in the total expenditures by 56 percent. This increase pertains to allocations for government investments, the insurance and pension fund, monthly instalment dues, and cash support for social protection programs like Takaful and Karama, showing an annual growth rate of 14 percent.

Expenses for the education sector increased by 16 percent, while support for food commodities, medical supplies, and health workers experienced an annual growth rate of 36 percent.

Meanwhile, Moody’s credit rating agency, in its report on the Middle East and North Africa for 2024, stated that finances in the region are generally stable. However, Moody’s expressed concerns about Egypt, anticipating significant debt affordability and liquidity strains due to external imbalances, currency depreciation, and high-interest rates. The agency projected that a substantial portion of Egypt’s revenue, around 60 percent, would be absorbed by interest payments in the fiscal year ending June 2024, limiting the government’s budgetary flexibility in responding to potential shocks, including those arising from the conflict between Israel and Hamas. Additionally, Egypt faces external financing gaps, mainly due to substantial external repayments.