Parliament finally approved the draft law presented by the government to open additional credit in the state budget for fiscal year (FY) 2017/2018, worth EGP 70.30bn.
The allocations for interests on the additional credit are estimated to be EGP 57bn and other expenses include EGP 2.3bn in compensation for residents of North Sinai and completing payments for some memberships in international institutions and bodies.
The required increases for the acquisition of financial domestic and foreign assets reached EGP 6bn. There are also increases in repaying local and foreign debts by EGP 5bn to face the repayment of public debt installments.
Hussein Eissa, head of parliament’s planning and budget committee, said that the additional credit represents 4% of the total expenses of this fiscal year and will not affect the target deficit by the end of the year.
Eissa attributed the Ministry of Finance’s approval to open additional credit to the changes in the exchange rate. However, the price of the dollar in the budget was set at EGP 16, though it has increased over the past months to EGP 17.7.
This fiscal year budget’s estimated debt burden was at EGP 380bn. However, it increased to EGP 433bn following the decision made by the Central Bank of Egypt (CBE) on interest rates.
The CBE reduced in February interest rates on overnight deposits to 17.75% from 18.75%. It reduced the interest rate on overnight lending to 18.75% from 19.75%.
The government is targeting a total deficit of 9.8% by the end of this year through achieving revenues worth EGP 838bn, including EGP 604bn in tax revenues.
Eissa said that approving the additional credit will not affect the target deficit as the Ministry of Finance expects an increase in tax revenues exceeding EGP 604bn, reaching EGP 624bn by the end of this year.
The planning and budget committee requested meeting with CBE Governor Tarek Amer in order to discuss monetary policies over the upcoming period in light of the new changes.
Yasser Omar, deputy head of the committee, said that the approval of parliament to open additional credit stemmed from the desire to avoid the criticism the government faced over last fiscal year’s final account, and moving some financial allocations without the approval of parliament with the liberalisation of the exchange rate in 2016, which forced the government to take some economic decisions in that regard.
Parliament approved the next fiscal year’s budget with expenditure of EGP 1.4tn, versus expected revenues of EGP 989bn, with a total deficit of 8.4% and expected growth of 5.8%.