Government spending, revenue on the rise

Egypt’s budget deficit reached LE84.5 billion, or 3.6 percent of GDP, for the period from July to October 2014. According to the November edition of the Ministry of Finance’s monthly report, the government spent LE183.7 billion while bringing in LE100.9 billion in revenues.

The numbers are higher across the board than the same period last year. From July to October 2013, the deficit reached LE74.6 billion, with expenditures of LE159.4 billion and revenue of LE81.9 billion. Although the deficit for this period in 2013 was smaller in absolute terms, it represented a larger share of the total economy, at 3.7 percent of GDP.

The ministry attributes the increase in revenue primarily to a 26.8 percent rise in tax receipts compared to the same period last year, as well as a 15.4 percent increase in non-tax revenue.

Gains in taxes on income, capital growth and profits came mainly thanks to state enterprises, with taxes on the Central Bank up 57.5 percent to reach LE4 billion, Suez Canal receipts up 56.5 percent to reach LE3.6 billion, and receipts from other companies growing 40.9 percent to record LE8.7 billion.

Taxes on domestic salaries meanwhile grew by 16.4 percent to reach LE6.6 billion. Taxes on industrial and commercial profits were up by more than 75 percent, but still recorded just LE1.9 billion.

Taxes on goods and services, including sales tax and stamp tax reached LE32.8 billion, growing by almost 26 percent.

Non-tax revenues were also driven by rising receipts from the CBE and the Suez Canal, which amounted to LE 19.3 billion.

Grants, however, declined sharply to LE151 million, compared to around LE7 billion between July and October of 2013.

On the expenditures side, employee compensation rise to LE66.4 billion, compared to LE57.1 billion in the same period last year.

Interest payments reached LE55.0 billion, 2.4 percent of GDP, mainly due to domestic debt. Domestic interest payments grew by 7.5 percent to reach LE46.6 percent. Meanwhile, interest payments on foreign debt amounted to LE1.8 billion, growing 7.3 percent compared to the same period last year.

The ministry did not provide an updated figure for total government debt. As of the end of June 2014, Egypt’s debt stood at LE1.9 trillion, or 95.5 percent of GDP.

Subsidy spending hit LE13.9 billion, growing 12 percent despite cuts to fuel subsidies. Most of these subsidies, some LE 9.5 billion, went to GASC, which purchases wheat and other commodities for Egypt’s food subsidy program.

The period covered by the report did not include any petroleum settlements. In early November, Egypt repaid US$1.5 billion in debt to foreign oil companies, and plans to repay at least another $1.5 billion by the end of December.

By the end of the current fiscal year in June 2015, the ministry anticipates that the budget deficit will reach LE240 billion, which represents 10 percent of GDP. It projects that revenue will reach LE549 billion while expenditures hit LE789 billion.

Total government debt is predicted to climb to LE2.2 trillion, around 91.5 percent of GDP, by the end of the fiscal year.