Egypt Independent

IMF estimates Egypt’s budget deficit to reach 11% of GDP in 2014/15



The International Monetary Fund (IMF) estimates that Egypt's budget deficit will reach about 11 percent of GDP in 2014/15, as measures yielding about 2.5 percent of GDP have already been approved.

"Policy measures on which work is already underway, including reducing untargeted energy subsidies, controlling the wage bill, VAT and mining laws, in addition to improving the efficiency of public financial management will be important," IMF mission chief Paul Jarvis said in an e-mailed statement late Tuesday. "In 2015/16, it will be important to keep expenditure in check, including through continued subsidies reform to reduce the budget deficit below 10 percent of GDP."

"Egypt seeks to improve its external position, though additional external financing will still be needed through the medium term," the statement explained.

Jarvis also pointed out that the policies in Egypt that have been implemented so far, along with a return of confidence, are starting to produce a turnaround in economic activity and investment.

"We now project that growth will reach 3.8 percent in FY 2014/15," he added. "The energy sector reforms and sizable investments will be critical to reduce energy supply bottlenecks and raise potential growth." 

The IMF mission visited Cairo from November 11 to 25 to hold discussions for the 2014 Article IV consultation. Discussions focused on economic and financial developments, the outlook and the authorities’ economic policies and reform plans

During its visit, the team met with government and central bank officials, members of the banking sector and the diplomatic community.

"The megaprojects offer prospects for jobs and growth but should be carefully designed and monitored to limit potential fiscal risks, for example if they entail additional public investment or large contingent liabilities," Jarvis said. “Egypt is vulnerable to adverse global economic developments and regional security risks."
 
For the reform effort to succeed it will need to be pursued steadfastly," he added.