Egypt witnessed primary budget surplus of about EGP 14bn during the first half (H1) of fiscal year (FY) 2020/21, while it recorded a budget deficit fall to 3.6% of GDP compared to 4.1% during the same period of FY 2019/20, according the Ministry of Finance. Mohamed Maait, Minister of Finance, said on Thursday that the period from July to December 2020 saw good and balanced financial indicators despite the negative repercussions of the second wave of the novel coronavirus (COVID-19) pandemic on global and local markets. He noted that the recent budget estimates affirmed the Finance Ministry's flexibility and capability to deal with the repercussions of the pandemic, most importantly the decline of GDP and economic activity, which led to a decline in public revenues against the targeted figures. The minister explained that these positive results were achieved in parallel with meeting all the needs of the health sector, and increasing capital expenditure represented in the rise of government investments at an annual growth rate of 103% during H1 of FY 2020/21. Maait pointed out that the stability of financial indicators and the decline in annual inflation rates to about 5.4% in December 2020, and the decline in the prices of many basic food commodities also contributed to encouraging the Central Bank of Egypt to reduce lending and discount rates, which pushed interest rates on government debt instruments to decline. However, the decline in interest rates on debt instruments is still less than that for lending and discount rates, as the average interest rate reached 12.7% on short-term treasury bills and about 13.6% -14.2 % on long-term bonds at the end of December 2020. The Minister noted that the decrease in interest rates on government debt instruments contributes to reducing the burden of debt service. The minister added that the annual growth rate of the total revenues of the public budget agencies rose by about 16% during H1 of FY 2020/21, to reach about EGP 453bn compared to about EGP 21bn during the same period of the previous fiscal year. He stated that this increase in revenues exceeded the annual growth rate of the total budget expenditures, which amounted to about 9.9%, so that the expenditures reached EGP 681.2bn compared to EGP 621.6bn in the previous year. The minister pointed out that the total tax revenues increased by about 10% during the period from July to December 2020 to reach about EGP 334bn, compared to about EGP 304bn during the same period of the previous fiscal year, thanks to the growth in tax revenues from non-sovereign entities by about 12.4% on the same period in FY 2019/20. Moreover, tax arrears on some petroleum sector companies worth EGP 16bn were settled during H1 of FY 2020/21, in addition to other tax dispute settlements made within the framework of the Income Tax law, which gives the taxpayer an exemption of up to 70% of fines on delay upon payment of the entire principal tax due until the middle of December 2020.
