According to the International Monetary Fund’s (IMF) Fiscal Monitor Report, Egypt’s gross debt ratio to GDP is expected to reach 92.7% in fiscal year (FY) 2023, up from 88.5% in FY2022. This ratio is the highest among the emerging markets and the middle-income economies.
The IMF projected that the gross debt ratio would decrease in FY 2024 to 88.1%, and continue to decline in FY 2025 and 2026 to 83.9% and 81.5%, respectively.
The report also expected that the country’s revenues would decline to 18.1% of GDP in FY2023 and 2024, down from 18.9% in FY2022. However, the report anticipated that revenues would increase in FY2025 and 2026 to 18.3% and 18.8%, respectively. Moreover, expenditures are likely to drop to 22.8% of GDP in FY 2023, its lowest level since 2014. It forecasts that expenditures will increase again in FY 2024 and 2025 to 28.9% and 29.4%, respectively.
Furthermore, the report estimated that the government’s adjusted primary balance of GDP would hit 2.3% in FY2023, the highest since 2014, compared to 0.2% in FY2022.
The report expects Egypt’s overall balance to improve to -4.6% in 2023 from -5.8% recorded in 2022. The overall balance is the difference between the government’s revenues and spending.
Commenting on the high gross debt ratio to GDP, Ruud de Mooij, Deputy Director of the Fiscal Affairs Department at IMF, said that this high ratio was a concern and was due to the high-interest rate. He added that the Egyptian government must work to reduce this rate of debt and restore confidence.
De Mooij suggested that the most important steps for the government were enhancing revenues, reducing tax exemptions that could be a source of important resources, and managing them well, such as value-added tax.
Regarding revenue reduction, he noted that the government of Egypt should decrease energy subsidies and promote IPOs, explaining that all of these measures would contribute to reducing debt.
On 16 December 2022, the Executive Board of the IMF approved a $3bn Extended Arrangement for Egypt for 46 months. Egypt’s IMF-supported programme presents a comprehensive policy package to preserve macroeconomic stability, restore buffers, and pave the way for inclusive and private-sector-led growth.
