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Egypt Plans Substantial Subsidies in New Budget

Dubai – Egypt’s economic strategy for the upcoming fiscal year is marked by a commitment to addressing vital subsidies and bolstering financial stability. In its 2024/2025 state budget, the government has allocated over 125 billion Egyptian pounds ($2.66 billion) for bread subsidies and more than 147 billion pounds for petroleum products subsidies.

These subsidies are part of a broader effort to navigate economic challenges, including the impact of global events like Russia’s invasion of Ukraine. To fortify its financial position, Egypt recently secured an $8 billion expanded loan deal with the International Monetary Fund (IMF) after allowing its currency to depreciate by nearly 51%.

Finance Minister Mohamed Maait emphasized the release of goods and merchandise valued at $14.5 billion since the beginning of the year, reflecting ongoing efforts to manage import challenges.

In addressing socio-economic concerns, the government has allocated a total of 596 billion Egyptian pounds for social protection programs, with 134 billion pounds specifically earmarked for food subsidies. These programs aim to provide essential staples like bread, rice, and sugar at reduced prices, benefiting a significant portion of the population.

Maait justified the need for petroleum product subsidies amidst global oil price hikes and currency fluctuations. The upcoming fiscal year’s expenditures are projected to reach 3.9 trillion pounds, with anticipated revenues standing at 2.6 trillion pounds.

Egypt’s economic goals are ambitious yet grounded, aiming to achieve a primary budget surplus of 3.5% and to reduce the total budget deficit to 6% of GDP in the medium term. Additionally, the government aims to decrease the debt-to-GDP ratio to less than 80% within the next three years.

To alleviate financial strain, Egypt is set to receive additional support from various sources. Maait anticipates more than $20 billion in foreign currency inflows following the IMF agreement. Moreover, the European Union announced a 7.4 billion euro ($8.1 billion) funding package for Egypt, while the World Bank intends to provide $3 billion of financing over three years, with the first $1 billion expected by the end of June.

photo source: Google

By: Montel Kamau

Serrari Financial Analyst

20th March, 2024

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