Egypt cuts growth targets to 4.1% and hikes subsidies for essential materials and fuels

Egypt’s cabinet said on Wednesday that it has approved the draft budget for the upcoming 2023-2024 fiscal year, which includes a 20% increase in food subsidies and a 24% increase in petroleum subsidies. .

The release said the target growth rate in the budget for the fiscal year starting in July it is 4.1%, instead of 5.5% in past, while estimates of budget indicate an inflation rate of 16%.

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Finance Minister Dr. Mohamed Maait said the target growth rate in the budget for the new fiscal year (2023/2024) came to light the estimates of the Ministry of Planning and Economic Development, the targets of the Central Bank of Egypt and global price estimates.

Egypt is struggling to contain the economic pressures put in light from the consequences of the war in Ukraine, including the high costs of importing grain and fuel.

The Egyptian pound has come under pressure again this month despite three sharp devaluations since last March, which has lost nearly half its value against the dollar.

Urban inflation has accelerated to an all-time high in five and a half years, to 31.9%.

Total revenue is expected to increase by 38.4% and tax revenue by 28%. The draft budget still needs parliamentary approval for approval.

The finance minister said that, in light of the budget forecasts, which include targeted reform measures, the primary surplus should reach 2.5% of GDP. It is the highest primary surplus targeted as part of deleveraging efforts in percentage of GDP, indicating that the new budget estimated the inflation rate at 16%.

He explained that total revenue in the new budget is expected to grow by 38.4%, while tax revenue is expected to grow by 28%. This is due to the expansion of the tax base, the enrollment of new lenders, the strengthening of mechanization efforts, as well as the implementation of a large number of administrative and legislative reforms.

The budget for the new fiscal year (2023/2024) indicates a growth in appropriations for support, grants and social benefits of 28.2%, compared to 17.1% in budget for the fiscal year in course (2022/2023). matter prime food with an annual growth rate of about 20% and subsidized materials Oil, with a growth rate of 24%.

The budget also includes export support at 462.5%, health insurance and medicines at an annual growth of 50.4%, housing support (low-income and social housing) at an annual growth rate of 103 .5%, the Social Security pension at an annual growth rate of 24%, plus contributions to pension funds and medical expenses for citizens.

The budget it also expects 14.6 percent annualized growth in employee salary allocations and compensation for the next fiscal year.