According to ministerial committee

Egypt's budget deficit expected to surge to 11.7 %

GMT 07:49 2011 Monday ,26 December

Arab Today, arab today Egypt's budget deficit expected to surge to 11.7 %

Egypt's Central Bank
Cairo - Arabstoday

Egypt's Central Bank Egypt's budget deficit is expected to reach LE182 billion ($30 billion) in the current financial year. Al-Ahram daily news reported that a top level ministerial committee concluded on Saturday that this is up from the originally projected LE134 billion.
The committee formed of the Central Bank's governor, as well as ministers of finance, planning, industry and supply, indicated that foreign borrowing has become a necessity for the Egyptian economy to cover the deficits in budget and the balance of payment along with the drop in international reserves. The borrowed amount will range from $10 billion to $12 billion.
In June, Egypt declined a $3.2 billion facility from the IMF; but Egyptian officials have recently announced that negotiations have restarted for a much larger loan.
The budget deficit for the financial year 2011/2 was forecast to stay at 8.6 per cent of GDP but the recent cabinet announcement pushes it upwards to the tune of 11.7 per cent of GDP.
Farouk El-Okda, CBE governor, explained that LE48 billion were added to the deficit, LE24 billion out of which are urgent. Therefore, the budget deficit will range from LE158 billion minimum and LE182 maximum, translating into 10.14 and 11.7 per cent, respectively.
The surge in deficit, El-Okda indicated, comes from an expected drop in tax revenues; highlighted by the decline in profitability of the telecommunications sector and a 30 per cent drop in tax revenues from the banking sector.
Egypt has resorted to local borrowing to cover the funding gap, pushing yields on t-bills to surge above 15 per cent. El-Okda said that LE600 billion has already been issued in government bills, out of which LE450 billion was covered by local banks.
On Thursday, Moody's Investors Service downgraded the local-currency (LC) deposit ratings of five Egyptian banks by one notch following the downgrade on Egypt’s sovereign ratings. Three public banks – National Bank of Egypt, Banque Misr and Banque du Caire – were downgraded from B1 to B2. Commercial International Bank, the largest listed bank was downgraded from Ba3 to B1 and Bank of Alexandria From Ba2 to Ba3.
This downgrade followed a broader downgrade of Egypt's government bonds by Moody's Investors Service from B2 from B1, citing the unsettled political situation in the country for undermining investor confidence.
"Further surges in borrowing costs are expected to reflect the increasing risk of Egypt's government. This will make it increasingly harder for the government to borrow locally or even internationally," Magda Kandil, executive director of the Egyptian Centre for Economic Studies explained.
Kandil agrees with the ministerial committee that a far larger loan will be needed from the IMF. She however labels the loan as "aid" opposed to regular assistance.
"Any IMF aid will come with requirements of structural adjustments that the government has to implement to ensure the country's repayment ability," Kandil added.
Egypt's newly appointed prime minister, Kamal El-Ganzouri, was quick to announce on 12 December that austerity measures were a must to save Egypt's economic situation that was "worse than anyone imagined."
El-Ganzouri added that there is a dire need to save LE20 billion from government spending, but the cuts will be in sectors that do not directly affect the Egyptian citizen. Such measures are already underway.
Last Tuesday, the cabinet approved a plan to cut subsidies to energy-intensive industries as part of the austerity plan to reduce the budget deficit by LE20 billion ($3.3 billion). The final decision, however, will need the approval of the SCAF, the ruling military council.
Two of the convening ministers on Saturday proposed increases in taxation and customs to face the crisis.
For his part, the finance minister, Momtaz El-Saeed, said Saturday that raising taxes on some products such as cigarettes and tobacco will generate an additional LE2 billion in revenues.
Gouda Abdel Khalek, the supply minister proposed increasing customs on components imported by the local automotive industry, which, according to the minister are over protected.

ahramonline .

Arab Today, arab today
Arab Today, arab today
arabtoday arabtoday arabtoday
بناية النخيل - رأس النبع _ خلف السفارة الفرنسية _بيروت - لبنان
arabs, Arab, Arab