Year 2021: Egypt’s macroeconomic performance and the challenges ahead – reviews – books


Despite the impacts of the pandemic, however, the Egyptian economy managed to maintain its positive GDP growth in fiscal years 2019/20 and 2020/21 (3.6% and 3.3% respectively), although this rate growth has persisted amid current challenges globally and domestically.

Meanwhile, the government has affirmed its commitment to reach pre-pandemic levels on all macroeconomic indices starting with the current 2021/22 fiscal year, which ends in July 2022.

Below are the government’s main targets through the end of the current 2021/22 fiscal year on all macroeconomic and real sector indices to achieve its key goal of restoring pre-pandemic levels.

GDP growth

The government aims for GDP growth of 5.4% in fiscal years 2021/22, after a slowdown in fiscal year 2020/2021 estimated at 2.8%, in light of the gradual resumption of the economic recovery from Egypt after the COVID-19 pandemic.

The value of Egypt’s current fiscal year 2021/22, the first half of which ends at the end of December, is estimated at EGP 2.6 trillion, the largest in Egyptian history, rising from value of EGP 2,200 billion for fiscal year 2020/21.

Egypt’s GDP is expected to grow 6-7% in the second quarter of fiscal 2021/22 (October-December), which is lower than the 9.8% growth in the first quarter, according to the Egyptian Minister of Planning and of Economic Development Hala El-Said. .

Egypt is targeting an economic growth rate of 5.5 to 5.7 percent in fiscal year 2021/2022.

In the first quarter (Q1) of FY2021 / 22, Egypt’s GDP grew by 9.8%, which is the highest quarterly growth rate in the past two decades and demonstrates an improvement in l economy and a trend of recovery after the pandemic, according to the Ministry of Planning and Economic Development.

In addition, Egypt’s GDP is expected to reach a growth rate of 6-7% by the end of the second quarter of fiscal year 2021/22, which will end by the end of December, according to the planning ministry.

The government has taken several steps to achieve the GDP growth target in fiscal year 2021/22, including increasing public investment allocations by 46%, compared to fiscal year 2020/21, to achieve 933 billion EGP.

In addition, the government plans to reduce the budget deficit to 6.7% and achieve an initial surplus of 1.5%.

In addition, the government has allocated 4.2 billion EGP to support the export sector in light of presidential directives to increase the value of Egyptian exports to 100 billion EGP over the next three years.


Tackling inflation is one of the government’s main goals in FY2021/22, especially with high global inflation rates and continued supply chain disruptions.

It should be noted that the Central Bank of Egypt (CBE) has redefined its inflation target until the end of 2022 to 7% (± 2%) instead of 9%.

The CBE said the action is aimed at supporting the stability of the Egyptian economy.

Egypt’s overall annual inflation rate jumped in November to 6.3%, from 2.7% the same month in 2020, according to CAPMAS.

However, these figures remain below the EPC target.

Faced with the likely increase in inflation, the government has established four strategic warehouses and logistics centers in Cairo with the aim of covering all the governorates of the country in collaboration with the private sector and the Egyptian Sovereign Fund.

In addition, the government adopts rapid response solutions by supplying the local market with commodities produced by state facilities at cost price.

The government is also developing partnerships and collaborations with all international financial institutions (IFIs) in order to obtain the necessary financing to support all economic sectors as well as the execution of national projects.

In addition, the CBE continues to ease monetary policy over 2021 by maintaining key interest rates at December 2020 levels to cope with rising inflation.

High debt

According to the recent update of the Global Debt Database, released by the International Monetary Fund (IMF), Egypt’s external debt is expected to grow to 91.4% of the country’s GDP by the end of 2021 amid the pandemic and associated challenges.

At the end of fiscal year 2019/20, the government succeeded in reducing Egypt’s overall debt to 88%, down from 108% in fiscal year 2016/17.

Faced with the high debt, the government has adopted a Medium Term Debt Management Strategy (MTDS) which aims to reduce the public debt to GDP ratio to 84% during the next fiscal year 2022/23, which begins in July 2022. , and 79 percent in fiscal year 2023/24.

The strategy also aims to reduce debt services, extend their duration and improve government security in the markets in order to broaden the investor base, which in turn will provide the necessary liquidity to support the budget.

According to this strategy, the trajectory of the external debt will be fixed according to the expected cash inflows in the country up to a maximum of 37% of the GDP, which will be placed on a downward trajectory per year.

The strategy also aims to reduce the external debt-to-GDP ratio to less than 30 percent over the medium term, with the objective of reducing the public debt-to-GDP ratio to around 70 percent over the next four years and to cap loans obtained from foreigners. ‘external organizations over the same period.

Additionally, the strategy includes settling a portion of the debts by exchanging them for single state-owned assets. The goal is to reduce public debt by EGP 100 billion per year for the next four years.

In this regard, the IMF said that the COVID-19 crisis has disrupted the downward trend in Egypt’s debt-to-GDP ratio since 2016/17, but that public debt is expected to resume a downward trajectory over the course of 2021/22 as growth rebounds.

Sustained reduction in public debt will require a new impetus for reform to support strong and sustained growth; a comprehensive structural reform program is essential to foster private sector development and unleash Egypt’s considerable growth potential, according to the IMF.

State revenue

In line with the MTDS, the government has developed a Medium Term Strategy (MTRS) – in collaboration with the IMF – to increase fiscal revenues.

Through this strategy, the government plans to mobilize the country’s income to increase it by 2% of GDP over four years, supporting Egypt’s targeted budget surpluses and creating space for priority health spending, education and social protection.

Beyond the pandemic, the government aims to broaden the tax base by increasing the ratio of non-sovereign tax to GDP by 2% over four years and by introducing a new simplified VAT system.

In this regard, Finance Minister Mohamed Maait stressed that the increase in tax revenue will not be achieved by imposing new taxes or increasing current tax levels, but through sound fiscal management, efficiency and automation.

The minister also said that Egypt lost more than 90% of its VAT revenue due to the pandemic in 2020 and 2021, but managed to achieve a 14% increase in total tax revenue over the course of fiscal year 2020/21.

Meanwhile, the government has said it will expand its offering of debt instruments to investors in the future, in addition to preparing for the second issuance of its sovereign green bonds.

It should be mentioned that Egypt is expected to be re-listed in JP Morgan’s Emerging Markets Bond Index (EMBI) by the end of January 2022, with an estimated weight of 1.8% across 14 government bonds. for a total value of $ 24 billion.

Egypt will also join the JP Morgan Environment and Governance index by the end of January 2022 with 1.1% of the index, based on Egypt’s issuance of its green bonds in October 2020.

The action will allow large investment funds and foreign investors to invest in Egyptian debt securities in local currency, with around $ 1 billion in new investment expected to be pumped into the Egyptian government stock market, according to the Minister of Finance.

Budget deficit

The government aims to reduce the budget deficit to 6.7% of GDP, down from 7.8% in fiscal year 2020/21.

Thus, the government is working to increase budgetary revenue by 22% to reach EGP 1.3 trillion in fiscal year 2021/22, as well as to increase revenue from other sources by 33% to reach EGP 380 billion EGP.

The latest report from the Fiscal Monitor, released in October, forecasts that Egypt’s budget deficit will decline to 6.3 percent of GDP by the end of fiscal year 2021/22, from 7.3 percent during the year. financial year 2020/21.

However, that figure is up 0.5% from the IMF’s April forecast for the same fiscal year.

Challenges ahead

Egypt’s high public debt and large gross financing needs – the amount of money the government has to issue each year, both to renew maturing loans and to finance new debt – make it vulnerable to external shocks, such as higher global borrowing costs as developed economies gradually withdraw their economic stimulus, according to the IMF.

Beyond this, it is essential that Egypt focuses on structural reforms to encourage private sector-led growth, such as policies to increase revenues to finance essential public services, including health, l education and social safety nets, strengthen governance and transparency, and continue to develop financial markets.

In addition, it is essential to reduce the role of the state in the economy, ensure a level playing field for all businesses, improve the business climate and increase Egypt’s integration. in global trade by reducing trade barriers and ensuring predictability in customs procedures to unleash enormous growth potential, reduce poverty and improve inclusion.

Fitch Ratings said in a recent report, released in December, that a new IMF program for Egypt is likely to address fiscal and budget issues due to the pandemic.

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