CAIRO: Egypt’s newly appointed finance minister said Wednesday the growth target had slipped and the budget deficit would widen more than official forecasts as the turmoil of the past three years takes its toll on the economy.
Hany Kadry Dimian, who took office last month in a surprise Cabinet reshuffle, said the state’s budget deficit for fiscal year 2013/14 would be around 12 percent and expected it to stand at 10-10.5 percent for the next fiscal year.
“In best conditions it [this year’s deficit] will be around 11 to 12 percent and leans more to higher than 12 percent,” Dimian, a former Finance Ministry official, told reporters.
A Finance Ministry report released last year had expected the deficit to stand at 9.1 percent in 2013/14, down from 13.8 percent in 2012/13.
Egypt’s economy has been hammered by three years of upheaval that followed the uprising that toppled President Hosni Mubarak.
Investors and tourists have been driven away and the disillusioned youths who took to the streets have seen no better prospect for prosperity, risking further unrest for a government anxious to get the economy moving to shore up support.
Conceding the target for expansion had also been revised, Dimian said “large events happened on the political and security and even economic areas so we expect 2 to 2.5 percent growth.”
That was down from a previous target of 3 to 3.5 percent. Economists polled by Reuters in January saw 2 percent growth for the year ending June 2014.
In January, Egypt said it was targeting growth of 4 to 4.5 percent next fiscal year, ending June 2015.
Growth had been running at around 6-7 percent before the protests – although even that pace was barely enough to produce work for the number of youths entering the job market.
Dimian was appointed in an unexpected Cabinet reshuffle. That came shortly before a presidential vote expected in two to three months and which army chief Field Marshal Abdel-Fattah al-Sisi is mostly likely to win.
Sisi ousted Islamist President Mohammad Morsi last July in reaction to mass protests against his elected year in office, a move that brought him wide popularity among ordinary egyptians.
The newly formed Cabinet vowed to do its best to achieve the public’s called-for demands of economic and security enhancements and achieving social justice for the millions of poor and uneducated Egyptians.
But Sisi last week expressed grave concern over Egypt’s economy, which he described as very difficult and requiring hard work, insistence and patience.
In response to the public’s pleas for social justice, the government introduced a minimum wage of 1,200 Egyptian pounds ($170) for all public sector employees in January but that additional expenditure is expected to compound the pressure on the already stretched budget.
Egypt has launched two stimulus packages of around 30 billion Egyptian pounds ($4.31 billion), each after Gulf Arab countries Saudi Arabia, the UAE and Kuwait pledged more than $12 billion to support the ailing economy.
But Gulf aid is not expected to keep pouring in. Last year, UAE’s Deputy Prime Minister Mansour bin Zayed al-Nahyan said Egypt could not live on Gulf aid alone and must think of unusual and innovative ways to boost its income.
“Aid will definitely not continue in the same way but it will take a new form of foreign direct investment from the Gulf. This is a more sustainable form,” said Moheb Malak, an economist at Prime Holding.
UAE-based Arabtec Holding had agreed on a $40 billion housing project with the Egyptian army that is said to be the biggest in the region in which 1 million housing units will be built to alleviate the housing problem in the country of 85 million people.
Dimian said the government was also studying the idea of adding a 5 percent tax to individuals with high income that will be implemented for a temporary period to support the economy during the time of crisis.
“It will be a 5 percent tax on their incomes for a period that does not exceed two-five years. I believe that we can apply this tax for a period of three years,” he said, adding that the issue will be presented to the Cabinet for discussion soon.