CAIRO: Cabinet agreed Wednesday on a new annual budget with a $17 billion deficit, a 36 percent rise from last year, due to a decline in revenues caused by the global economic crisis, the country s official spokesman said. Magdy Radi told the state news agency that government revenues are expected to slump 22 percent to $39 billion in the coming year, in large part due to declines in Suez Canal revenue and international tourism. The budget deficit as percentage of GDP will rise to 8.4 percent in the fiscal year 2009/2010 budget, up from just 6.9 percent in the current one. Egypt has been badly affected by the global financial meltdown and the government has said that the crisis could seriously affect the labor market. Official unemployment is 8.8 percent, but independent analysts predict it is twice as high. Egypt posted growth rates of around 7 percent for three years running after a series of economic reforms in 2004 that promoted a flood of foreign investment. Growth in the last few quarters, however, has dropped to 4.1 percent and may dip even lower, according to financial analysts warning of rates as low as 2 to 3 percent in the coming year. Egyptian Finance Minister Youssef Boutros-Ghali, in a note of optimism, said in February that GDP growth would rebound to between 7 and 9 percent after the current global meltdown is over. But he didn t say when he expected that recovery to begin, or when Egypt would realize those growth rates. Egyptian officials - with analysts echoing - have repeatedly said the country is well positioned to weather the current economic slump. They have cited ample liquidity in the banking sector and a diversified economic base, as well as low consumer and corporate debt levels as evidence of the economy s strength. Even so, Egypt faces daunting challenges, with about 20 percent of its 78 million residents living below the poverty line of $2 per day, according to the World Bank. -AP
