Egypt on track to beat its budget deficit target

According to the Egyptian finance minister Youssef Boutros-Ghali the Egyptian government is on track to beat its budget deficit target for the second year running. Talking at an investment conference in Cairo Boutros-Ghali said that the deficit will, “very likely,” decline to 7.5 per cent of gross domestic product in the fiscal year through June from 8.1 per cent in the previous 12 months, official target for the deficit is 7.9 percent.

The International Monetary Fund recommended that Egypt reduce the shortfall by 1.5 per cent to 2 per cent of gross domestic product this fiscal year, to demonstrate its intentions of reducing the gap to 3 per cent by 2015. The Egyptian government relies heavily on borrowing from domestic banks to subsidise the deficit and thereby tends to crowd out lending to the private sector.

The finance minister said that the country may grow 6 per cent or more this year, driven by a, “very lively domestic demand component,” within the country's economy. He also said that despite the fact that both domestic investment and consumer spending had been affected by the crisis both sectors, “still held up”.

The government estimates that the country might attract as much as $9 billion in foreign direct investment this year, up from $6.7 billion in the previous year. Foreign investment, along with revenue from tourism and the Suez Canal, helped the economy expand at an average rate of 7 percent in the three fiscal years through June 2008.

Source: Bloomberg

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