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Ministry of Finance of Egypt
Egypt’s Economic Reform & Stabilization Program Sustaining inclusive balanced growth path
September 2019
Agenda
2
Latest Macroeconomic Developments
Evolution of Fiscal Indicators
1
2
External Accounts’ Development 3
Social Protection Profile 4
(1) Latest Macroeconomic Developments
3
4
Higher and more resilient growth path
Implemented reforms restored confidence & enabled Egypt to achieve strong diversified economic recovery. Growth reached 5.6% in 2018/19, the highest rate since the financial crisis in 2008 & one of the highest rates among Emerging Markets. We target a 6-7% growth rate over the medium term.
4.4 4.3 4.2
5.3 5.6
6.0
6.5
7.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5
2014/15 2015/16 2016/17 2017/18 2018/19Prel. Act.
2019/20ProposedBudget
2020/21Forecasts
2021/22Forecasts
Real Growth Rate (%)
5
More diversified growth with higher investment and net exports contributions
Economic reforms adopted led to strong investment and net exports performance, both becoming main drivers of growth since FY 2017/18.
0.1
1.1 1.0 1.0 0.8
-1.6 -1.3
1.7
1.9 2.3
-1.2
0.6 0.8
1.4
0.4
0.5 0.3
0.2
2.2
3.8 3.4
1.1
1.2 1.2
2.5 2.5
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
2012/2013 2015/2016 2016/2017 2017/2018 2018/19Prel. Act.
2019/20Budget
Contribution to real GDP growth (%)
Investments
Final Consumption
Private Consumption
Public Consumption
Private Investments
Net Exports
Public Investments
6
With realized job rich growth rates, unemployment is trending downward. It reached less than 8 percept recently.
More jobs are being created leading to lower unemployment rate
12.6
13.3 13.3
12.7 12.5
12.0
9.9
8.1
7.0
8.0
9.0
10.0
11.0
12.0
13.0
14.0
201
1/2
012
201
2/2
013
201
3/2
014
201
4/2
015
201
5/2
016
201
6/2
017
201
7/2
018
Ma
rch
201
9
Unemployment Rate (%)
(2) Evolution of Fiscal Indicators
7
8
Significant pro-growth fiscal consolidation is ongoing driven by long-lasting reforms on both revenues & expenditure sides
16.5%
12.5% 12.7% 11.4%
9.8%
8.2% 7.2%
6.2%
4.7%
-8.4%
-4.6% -3.7%
-2.3%
0.0%
2% 2.0% 2.0% 2%
-10%
-5%
0%
5%
10%
15%
20%
13/1
4
14/1
5
15/1
6
16/1
7
17/1
8
18/1
9P
rel. A
ct.
19/2
0B
udg
et
20/2
1T
arg
et
21/2
2T
arg
et
Overall Deficit and Primary Balance (Excluding Grants) (% of GDP)
Overall Deficit Primary Balance
9
Putting debt to GDP ratio on a steep declining path to reach 90.3% by June 2019 and projected to further decline to less than 77.5% by June 2022
85.2% 94.9%
90.0%
78.2% 72.3%
67.7% 65.7% 64.2%
7.8%
7.9% 18.0%
19.0%
18.0%
15.3% 14.3% 13.3%
93.1%
102.8% 108.0%
97.2%
90.3%
83.0% 80.0%
77.5%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
0%
20%
40%
60%
80%
100%
120%
14/1
5
15/1
6
16/1
7
17/1
8
18/1
9P
rel. A
ct.
19/2
0B
ud
get
20/2
1T
arg
et
21/2
2T
arg
et
Total Budget Sector Debt (% of GDP)
Total Domestic Budget Sector Debt Total External Budget Sector Debt Total Budget Sector Debt
10
As non-sovereign tax revenues continues to increases despite a stable tax policy. We target annual non-sovereign taxes increase by 0.5% of GDP.
8.7% 8.8% 8.9% 9.5% 10.2%
11.0% 11.5% 12.0%
3.8% 4.2% 4.4%
4.7% 3.8% 3.0% 2.7%
2.5%
12.5% 13.0%
13.3% 14.2% 14.0% 14.0%
14.3% 14.5%
0.0%
3.0%
6.0%
9.0%
12.0%
15.0%
0%
2%
4%
6%
8%
10%
12%
14%
16%
14/1
5
15/1
6
16/1
7
17/1
8
18/1
9P
rel. A
ct.
19/2
0B
ud
get
20/2
1T
arg
et
21/2
2T
arg
et
Total Taxes (% of GDP)
Non-sovereign Tax Revenues Sovereign Tax Revenues Tax Revenues (% of GDP)
11
At the same time, improved expenditure structure supports a pro-growth and equitable fiscal consolidation path
Total Expenditures Breakdown (% of GDP)
14/15 15/16 16/17 17/18 18/19
Prel. Act. 19/20
Budget
Wages and Compensation of Employees 8.1% 7.9% 6.5% 5.4% 5.0% 4.9%
Purchase of Goods and Services 1.3% 1.3% 1.2% 1.2% 1.1% 1.2%
Interest Payments 7.9% 9.0% 9.1% 9.9% 10.1% 9.2%
Subsidies, Grants and Social Benefits, of which 8.1% 7.4% 8.0% 7.4% 5.5% 5.3%
Fuel Subsidies 3.0% 1.9% 3.3% 2.7% 1.6% 0.9%
Other Expenditures 2.1% 2.0% 1.8% 1.7% 1.5% 1.5%
Investments, of which 2.5% 2.6% 3.1% 2.5% 2.6% 3.4%
Self-financed investments 0.7% 0.6% 1.3% 0.9% 0.7% 1.2%
Deficit-financed investments 1.9% 1.9% 1.8% 1.6% 1.9% 2.3%
12
At the same time, improved expenditure structure supports a pro-growth and equitable fiscal consolidation path
27%
4%
26%
27%
7% 9%
19%
5%
36%
21%
6%
13%
Expenditures Breakdown
2014/2015
2019/2020Budget
Other
Expenditures
Subsidies,
Grants
and Social
Benefits
Investments
Wages and
Compensation
of Employees
Interest
Payments
Purchase
of Goods
and
Services
37%
6% 37%
9% 11%
30%
7%
33%
9%
21%
Expenditures Breakdown (Excluding Interest Payments)
2014/2015
2019/2020 Budget
Other
Expenditures
Subsidies,
Grants
and Social
Benefits
Investments Wages and
Compensation
of Employees
Interest
Payments
Purchase of
Goods and
Services
13
Ongoing pro-growth fiscal consolidation efforts will contain debt service costs over the medium-term
63.1%
69.2% 68.5% 69.5% 72.4%
62.3%
56.9%
44.3%
0%
10%
20%
30%
40%
50%
60%
70%
80%
14/1
5
15/1
6
16/1
7
17/1
8
18/1
9P
rel. A
ct.
19/2
0B
ud
get*
20/2
1T
arg
et
21/2
2T
arg
et
Total Interest Payments (% of Total Taxes)
7.9%
9.0% 9.1%
9.9%
10.1%
8.7%
8.1%
6.2%
6.0%
6.5%
7.0%
7.5%
8.0%
8.5%
9.0%
9.5%
10.0%
10.5%
11.0%
14/1
5
15/1
6
16/1
7
17/1
8
18/1
9P
rel. A
ct.
19/2
0B
ud
get*
20/2
1T
arg
et
21/2
2T
arg
et
Total Interest Payments (% of GDP)
14
Supported by efforts to elongate debt maturity, with average debt maturity at 3.3 years in June 2019 and projected to reach 5 years by June 2022
1.9 1.9 1.9
2.5
3.3
4.0
4.4
5.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
14/15 15/16 16/17 17/18 18/19Prel. Act.
19/20Budget
20/21Target
21/22Target
Average maturity (in year) of Egypt Budget sector debt
(3) External Accounts’ Development
15
16
Exchange rate flexibility is prompting strong decline in current account deficit
6.8
10.8
7.2
14.7 14.8
19.9
14.5
6.2 7.5
6.2
2.9%
3.9%
2.5%
4.9%
4.5%
6.0% 6.2%
2.5% 2.5%
1.8%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
0
5
10
15
20
25
2010
/11
2011
/12
2012
/13
2013
/14
2014
/15
2015
/16
2016
/17
2017
/18
2018
/19
Est
.
2019
/20
Fo
reca
st
Current Account Deficit excluding official transfers (grants)
USD billion
% of GDP
17
…driven by improved key foreign exchange inflows
Source: IMF Fourth Review, April 2019
-1.0% -1.1%
-2.2%
-1.6%
-0.4%
0.1%
-2.5%-2.0%-1.5%-1.0%-0.5%0.0%0.5%
2014
/15
2015
/16
2016
/17
2017
/18
2018
/19
Fo
reca
sts
2019
/20
Fo
reca
sts
Oil Trade Balance (% of GDP)
-10.0% -10.5% -12.3%
-13.4% -12.0% -11.2%
-16.0%
-11.0%
-6.0%
-1.0%
4.0%
2014
/15
2015
/16
2016
/17
2017
/18
2018
/19
Fo
reca
sts
2019
/20
Fo
reca
sts
Non-oil Trade Balance (% of GDP)
2.2%
1.1% 1.7%
3.9% 4.1% 4.2%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
2014
/15
2015
/16
2016
/17
2017
/18
2018
/19
Fo
reca
sts
2019
/20
Fo
reca
sts
Tourism Receipts (% of GDP)
5.8% 5.0%
8.5%
10.5%
9.0% 8.5%
3.5%4.5%5.5%6.5%7.5%8.5%9.5%
10.5%11.5%
2014
/15
2015
/16
2016
/17
2017
/18
2018
/19
Fo
reca
sts
2019
/20
Fo
reca
sts
Workers' Remittances (% of GDP)
18
…and resumed strong foreign appetite for investments in domestic T-bills and bonds since beginning of 2019
17.2
16.2
15.0
13.4
12.5 12.3
12.9
15.8
16.7
17.4
18.7 18.9
19.3
14.3%
13.3%
12.4%
10.5% 10.0%
9.0%
10.4% 11.2%
11.6% 12%
12.5% 12.4% 11.8%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
10.0
11.0
12.0
13.0
14.0
15.0
16.0
17.0
18.0
19.0
20.0
Jul-
18
Au
g-1
8
Sep
t-1
8
Oct
-18
No
v-1
8
Dec
-18
Jan
-19
Feb
-19
Mar
-19
Ap
r-1
9
May
-19
Jun
-19
Jul-
19
Foreign Purchases of T-bills and bonds /1
Billion dollars Net foreign holding of treasury bills & bonds
1/ The data reflects the last trading day of each month
19
NIR picked-up to reach a high of USD 44.4 billion by end June 2019 (on a preliminary basis), more than 8 months of imports coverage
16.7
20.1 17.5
31.3
44.3 44.9
3.3 3.9 3.7
6.4
8.4 8.0
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
50.0
2013/2014 2014/2015 2015/2016 2016/2017 2017/2018 July 2019
Net International Reserves US$ Billion Months of Imports
(4) Social Protection Profile
20
21
More equitable government spending policies
The government is restructuring subsidies schemes, developing a more efficient social protection network, increasing spending on human development, and introducing new programs targeting the most-vulnerable groups
Expenditure on Health,
73.1
Expenditure on
Education, 132.0
Electricity Subsidies,
4.0
Petroleum Subsidies,
53.0
0
20
40
60
80
100
120
140
160
180
200
220
LE B
illio
n
Expenditure on Health and Education Exceeds Energy Subsidies (Petroleum and Electricity) in FY19/20 Proposed Budget
Expenditure on Health,
30.8
Expenditure on
Education, 84.1
Electricity Subsidies,
13.3
Petroleum Subsidies,
126.2
0
20
40
60
80
100
120
140
160
180
200
220
LE B
illio
n
Expenditure on Energy Subsidies (Petroleum and Electricity) exceeds
Expenditure on Health and Education in FY13/14
22
A gradual shift from in-kind subsidies to cash and semi-cash transfers to ensure better targeting.
6.7
8.8
13.0
17.5 17.4 18.5
20.0 21.0
1.5
6.5
11.5
16.5
21.5
26.5
14/15 15/16 16/17 17/18 18/19Preliminary
Actual
19/20Budget
20/21Target
21/22Target
Cash Transfers (Including Takaful and Karama Programs) - LE Billion
23
More allocations for heath programs and initiatives
0.9 1.0
5.8
7.3
8.9
10.2
11.4
12.8
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
14/15 15/16 16/17 17/18 18/19Preliminary
Actual
19/20Budget
20/21Target
21/22Target
* includes medical treatment of Egyptian citizens by the treasury and health insurance subsidies
Subsidies and grants related to the health sector*
24
Egypt is filtering its food subsidies database to ensure better targeting and more efficient spending
39.4 42.7
47.5
80.5*
87.0 89.0 91.0 93.0
1.5
11.5
21.5
31.5
41.5
51.5
61.5
71.5
81.5
91.5
101.5
14/15 15/16 16/17 17/18 18/19Preliminary
Actual
19/20Budget
20/21Target
21/22Target
*140% increase in semi-cash allowance on food subsidy cards from LE 21 to LE 50 per month.
Food Subsidies - LE Billion
25
Egypt is implementing a comprehensive pension reform program to ensure its financial sustainability
33.2 44.0 45.2
52.5 48.5
160.5 170.0**
180.0**
1.5
21.5
41.5
61.5
81.5
101.5
121.5
141.5
161.5
181.5
201.5
14/15 15/16 16/17 17/18 18/19Preliminary
Actual
19/20Budget
20/21Target
21/22Target
** In light of the new suggested treatment
Contributions to Social Funds - LE Billion
Thank You
26
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