Egypt Targets Narrower 8.4% Budget Deficit

Egypt is targeting a budget deficit of 8.4% of GDP for the 2018-19 fiscal year that ends in June, compared with 9.8% in the previous year, Finance Minister Mohamed Maait told a news conference.

“Our economy has grown faster than we’ve expected, our GDP has grown faster than the falling of our debt,” Maait said, Reuters reported.

Egypt aims to reach an average interest rate on government debt instruments in the current 2018-2019 budget of about 14.7% compared with 18.5% in the 2017-2018 fiscal year.

“On debt strategy, there is no one single solution. We are working on creating a package to eventually reach our targets,” Maait said.

“One of the ways is to put a limit on what you’re going to borrow, internally or externally. You want to grow, you want to finance the growth, so either you have enough funds for your growth or you’re going to have to borrow.”

Egypt canceled on Monday three and seven-year treasury bond sales, an auction that had had a total value of 3.5 billion Egyptian pounds ($196 million), saying that the interest rates required were “not within the logical limits”, the finance ministry said in a statement on Tuesday.

The economy has been battered by years of turmoil that began after mass protests in 2011 forced President Hosni Mubarak to step down.

But the country has shown signs of recovery in recent months amid tough reforms including cuts to energy subsidies implemented by the government of President Abdel Fattah El-Sisi as part of a $12 billion International Monetary Fund loan agreement.

Speaking on the sidelines of the Euromoney conference in Cairo, Maait said that the government had not set a date for the issuance of euro bonds, or even the size of the expected offering.

“We will send the government within weeks a plan to manage the public debt, including putting a cap on external borrowing,” he said.

Amid a brewing storm for emerging markets, he believes his country’s economy can weather what has thrown many others into crisis—as long as the underlying causes don’t get any worse.

“It is worrying; however, we are able until now to absorb these negative effects... Egypt’s economy has sources to address this. However, I have to be very honest — up to a limit,” Maait said.

“So hopefully what is happening will be corrected and will move into a stable position, because yes we are absorbing all these shocks—oil prices, emerging market problems, increasing interest rates—but if they continue like that, it will be a problem for us.”