Egypt’s Minister of Finance Ahmed Kouchouk emphasized that the government’s priority is to enhance services for citizens, highlighting that the ultimate owners of the budget are the Egyptian people. The government is diligently working to maximize resources to create sufficient financial space for investment in human development and other areas that matter to citizens. Kouchouk stressed that budget figures, regardless of their improvement, are meaningless unless they result in a better-performing economy, a more competitive business community, and improved living standards.
In his first press conference since taking office, Kouchouk announced the financial performance results for the fiscal year 2023/2024. He acknowledged the challenges faced by citizens, the economy, and the government, stating that the state is trying to bear the brunt of the burden. He mentioned the EGP 500bn allocated for the first and second phases of the national project “Decent Life,” aimed at improving the lives of half of the Egyptian population and upgrading the level of services provided to them.
Egypt’s Minister of Finance stated: “No new taxes were imposed last year, and the 30% increase in tax revenues was spent on health, education, and social protection programs.” Tax revenues grew by 60%, exceeding the rate of expenditure growth, with non-tax revenues increasing by 190%, mainly due to diversifying state resources, including the treasury’s 50% share from the Ras El-Hikma deal.
Kouchouk emphasized the need to re-prioritise public spending to better address social dimensions and mitigate the impacts of economic reforms. He noted that spending on education increased by 25%, healthcare by 24%, and social protection by 20% last fiscal year, surpassing the rate of expenditure growth excluding debt service, which was less than 18%.
He explained that allocations for subsidies and social protection more than doubled, reaching EGP 550bn compared to the fiscal year 2020/2021. Support for petroleum products exceeded EGP 16bn, food subsidies rose to over EGP 133bn, and pensions under the “Takaful and Karama” program exceeded EGP 35bn. Additionally, EGP 185bn was paid to settle the obligations of the Social Insurance Fund, bringing the total settled to EGP 913.2bn in June 2024.
Kouchouk pointed out the government’s continued efforts to encourage investment and support economic activities despite global, regional, and local challenges. Export promotion support reached EGP 12.9bn, raising the total export support paid from the budget to more than 3000 companies to EGP 65bn since October 2019. Support for industrial production increased to EGP 11bn from just one billion, while support for health insurance and medications for the underprivileged rose from EGP 1.9bn to EGP 3.4bn in one year. Support for the social housing program for low-income citizens reached EGP 10.2bn, with an additional EGP 3.5bn allocated for natural gas connections to homes. Transport and commuting allocations were increased to EGP 8.1bn to provide passenger transport services at below economic cost as much as possible.
According to Egypt’s Minister of Finance, 2527 investors benefited from the production sector support initiative with approximately EGP 80bn, with the treasury covering the interest rate differential. More than 28,000 new cars were delivered to citizens under the presidential vehicle replacement initiative with green incentives exceeding EGP 718m.
Kouchouk acknowledged the challenges but expressed confidence in the government’s financial policy to further support human development, production, and exports. He noted the high cost of debt service due to inflation and interest rates and aimed to reduce it to 35% of total expenditures in the medium term.
Public investments have declined, and efforts are being made to increase private investment, particularly in industry and export-oriented sectors. The government has managed to rationalize spending by 2.2% of GDP, reduce the budget deficit to 3.6%, and achieve a primary surplus of 6.1%, including the proceeds from the Ras Al-Hikma deal.
Kouchouk emphasized the goal of reducing debt levels, with a comprehensive program to lower government debt in the medium term. Efforts are underway to reduce debt costs, diversify the investor base, currencies, and markets, and extend debt maturity to enhance confidence in the Egyptian economy. Simplified dispute resolution mechanisms and tax neutrality are expected to attract more private investments in economic activities.
Egypt’s Minister of Finance highlighted the comprehensive digital transformation of tax administration, which has helped expand the tax base and incorporate new taxpayers. The domestic debt rate for budgetary entities decreased by 4.7% of GDP despite economic challenges, aiming to maintain primary surpluses annually to reduce the debt-to-GDP ratio to less than 85% in the next fiscal year.
Kouchouk reported that the external debt balance of budgetary entities decreased by more than $3.5bn in June 2024, a reduction of over 4% compared to June 2023, with the average maturity of external debt reaching 12.7 years in June 2024.
Egypt’s Minister of Finance concluded by stating that investor confidence is being restored, with ongoing efforts to enter new markets, settle obligations, and regain a positive credit rating for Egypt. The cost of debt has started to decline for Egyptian sovereign international issuances, with international bond yields in the secondary market decreasing by 6% for 3-year terms and 3.1% for 5-year terms compared to February. Insurance rates against default for 5 and 10-year terms dropped by 224 and 168 points respectively.
The government has issued Panda bonds in China and Samurai bonds in Japan at very low costs and has been active in the government securities market, developing financial and tax settlement systems, and focusing on variable rate issuances to attract a new base of investors in government debt instruments.
