CAIRO: More tax revenues and economic reforms will help Egypt s government slash its budget deficit to 2 to 3 percent of gross domestic product in three to four years, the finance minister said on Wednesday. That compares to about 9.3 percent of GDP this year, Youssef Boutros-Ghali also told Reuters in an interview. He said the government had a conservative GDP growth estimate of 6.7 percent for the 2006/7 fiscal year starting on July 1. The economy grew at an annual rate of 6.1 percent in the three months to the end of 2005. We think this is conservative, due to all of the gas reserves that are coming on stream in the coming year, he said. The government has budgeted spending of LE 217.2 billion ($37.7 billion) for 2006/07. The cash deficit will be LE 53.6 billion, which is projected to be 8.1 percent of GDP for the year, Ghali said. We aim to drop the (budget deficit as percentage of GDP) by 1.5 percentage points to 2 percentage points per year. The government was aiming for a deficit level of 2 to 3 percent points of GDP within three to four years. Higher revenues from taxation and economic reforms, including better targeting of fuel subsidies, would help bring down the budget deficit ratio, he said. The government has budgeted LE 40 billion for fuel subsidies for 2006/07. Economists say bringing down the fuel subsidy bill is key in lowering the deficit. We will try and streamline it, target it better, Boutros-Ghali said. Prime Minister Ahmed Nazif said in April two thirds of gasoline subsidies go to the rich. Boutros-Ghali said he could not give further details on what the government was planning on fuel subsidies. We are working on it; people don t realize how difficult this is. People are not used to having higher prices. Last time energy prices were changed was in 93. You can t just wake up one morning and say: Okay, we re going to throw everything out of the window. You have to do it gradually. But it s happening, he said. The privatization of state-owned companies would also reduce the burden on state finances. The privatization program will relieve us of deficits that we carry now from a number of public entities, Boutros-Ghali said. That relieves some spending. The pace of privatization and other economic reforms stepped up in 2004 when a group of economic reformers, including Boutros-Ghali, took portfolios in a new government. In economic reforms last year, the government halved corporate income tax levels and sliced the top rate of personal income tax from 32 percent to 20 percent. Preliminary figures show that tax returns have increased by almost 100 percent from both individuals and corporations. Last year I got 1.1 million tax returns, this year I collected 2.3 million, Ghali said. The government expected tax revenues to climb to LE 60 billion next year from around LE 42 billion this year, he said. The government is planning to reform sales tax next year, he added. Reuters
