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(October 12th 2016)
Ministry of Finance
Key Economic Developments
2
Current Economic Status
Real GDP growth picked up recently after 4 years of sluggish growth, yet it continues to be below potential.
6.2
2.1
4.2 4.3
0
1
2
3
4
5
6
7
8
Ave
rage
20
05-2
010
Ave
rage
20
11-2
014
20
14/2
01
5
July
-Ma
rch
20
15/2
01
6
Real GDP Growth (%)
Unemployment rate reversed trend and started to slightly edge down to 12.5% by June 2016 after reaching a high of 13.3% in June 2014.
9.3
12.7 12.7 12.5
0
2
4
6
8
10
12
14
Average2005-2010
Average2011-2014
June 2015 June 2016
Unemployment Rate (%)
3
Current Economic Status
Consumption continues to be main driver of growth, albeit with a smaller contribution to growth recording smaller rate. Investment spending started to rebound recently and to post higher positive contribution rates. Net exports continue to be a drag on growth.
2.4
4.4 3.2
-2.0
1.6 -0.4
1.1
-1.4 0.2
1.2 0.8
5.0
5.0
4.4
4.6 3.5
4.4 5.1
2.7 4.0
3.2 5.0
-0.5
-2.4
-0.5
2.1 0.1
-2.2 -4.0
0.8
-2.1 -0.2
-1.6
-6
-4
-2
0
2
4
6
8
10
200
5/2
006
200
6/2
007
200
7/2
008
200
8/2
009
200
9/2
010
201
0/2
011
201
1/2
012
201
2/2
013
201
3/2
014
201
4/2
015
Ju
ly-M
arc
h2
01
5/2
016
Contribution to GDP growth – (Percentage Points)
Investments Final Consumption Net Exports
4
Current Economic Status
Serious fiscal challenges as reflected in the high deficit and debt ratios to GDP that reached critical levels
2.1
3.6 3.8
5.0
3.9 3.6
8.1 9.8 10.1
13.0 12.2
11.5
0
2
4
6
8
10
12
14
09
/10
10
/11
11
/12
12
/13
13
/14
14
/15
Overall Deficit and Primary Deficit (% of GDP)
79.2
82.1
79.0
89.0
90.6
93.7
65
70
75
80
85
90
95
100
09
/10
10
/11
11
/12
12
/13
13
/14
14
/15
Total Government Sector Debt (% of GDP)
5
Current Economic Status
High and sustained inflation differential between Egypt and its trading partners over a long period of time weakened competitiveness of the Egyptian economy
5.8 5.7 5.5 5.5
5.6 5.8
6.0
6.5
7.1
7.3
8.2
8.8
5.0
5.5
6.0
6.5
7.0
7.5
8.0
8.5
9.0
9.5
10.0
200
5/2
00
6
200
6/2
00
7
200
7/2
00
8
200
8/2
00
9
200
9/2
01
0
201
0/2
01
1
201
1/2
01
2
201
2/2
01
3
201
3/2
01
4
2014/2
015
201
5/2
01
6
13/8
/20
16
Exchange Rate (LE/Dollar) Egyptian Pound has depreciated against US$ by
around 56% during 2011-October 2016
10.9 11.7
16.2
11.5 11.0
8.7
6.9
10.1 11.0
10.2
14.0
1.8
3.4
1.5
0.6
2.4 2.6
1.3 1.7 1.2 0.9 0.76
0
2
4
6
8
10
12
14
16
18
06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 Jul-16
EU-27, US, Canada, Japan and China
Inflation Differential between Egypt and its trade partners*
Inflation Rate in Egypt Trade Partners' Average Inflation Rate
6
Current Economic Status
Egypt deteriorating trade deficit reflects declining exports and deteriorating oil balance
… and lower-than-potential capital inflows are also contributing to deteriorating capital account
6.1
11.1
13.2
8.1
6.8
2.2
4.0 3.8 4.1
6.4 6.8
2.8
-0.9 -1.4
-9.2
7.9
-2.6
-5.0
1.5 1.2
-0.6 -1.3
-15
-10
-5
0
5
10
15
20
05
/06
20
06
/07
20
07
/08
20
08
/09
20
09
/10
20
10
/11
20
11
/12
20
12
/13
20
13
/14
20
14
/15
20
15
/20
16
US$
Bill
ion
Foreign Direct Investments Portfolio Investments
4.9 6.0 4.9 4.0 5.1 2.9
-0.5
0.9
-0.8 -3.5 -3.6
-16.8 -22.3
-28.3 -29.1 -30.2 -30.0 -33.6 -31.6 -33.3 -35.6 -34.0 -40.0
-35.0-30.0-25.0-20.0-15.0-10.0
-5.00.05.0
10.0
20
05
/06
20
06
/07
20
07
/08
20
08
/09
20
09
/10
20
10
/11
20
11
/12
20
12
/13
20
13
/14
20
14
/15
20
15
/16
$U
S b
illio
n
Trade Balance (oil vs. non-oil)
Trade Balance (oil) Trade Balance (non-oil)
75
142 137
192
143 130
151 136
154 144
100
62
121
114
162
198 184 173
185 168 165 158 150 143
0
50
100
150
200
250
20
04/0
5
20
05/0
6
20
06/0
7
20
07/0
8
20
08/0
9
20
09/1
0
20
10/1
1
20
11/1
2
20
12/1
3
20
13/1
4
20
14/1
5
20
15/1
6
Non-oil and oil exports per capita ($US/person)
Oil exports per capita ($US/person) Non-oil exports per capita ($US/person)
7
Current Economic Status
Remittances declined in 15/16 due to capital restrictions and presence of parallel market
Tourism was hardly hit by recent incidents
7.2
8.2
10.8
10.5
11.6
10.6
9.4
9.8
5.1
7.4
3.8
2.0 4.0 6.0 8.0 10.0 12.0 14.0
2005/06
2006/07
2007/08
2008/09
2009/10
2010/11
2011/12
2012/13
2013/14
2014/15
2015/2016
Tourism Revenues (US$ Billion)
0.6 0.8 1.0 0.6 1.0 0.8 0.6 0.8
11.9
2.7
0.1
5.0 6.3
8.4 7.6
9.5
12.4
17.8 18.4 18.4 19.2
16.8
0.0
5.0
10.0
15.0
20.0
25.0
20
05/0
6
20
06/0
7
20
07/0
8
20
08/0
9
20
09/1
0
20
10/1
1
20
11/1
2
20
12/1
3
20
13/1
4
20
14/1
5
20
15/2
01
6
Private Transfers and Official Transfers (US$ Billion)
Official Transfers Private Transfers
8
Current Economic Status
Thus, Egypt external position is deteriorating This is leading to intensified pressures on NIR…
22.9
28.6
34.6 31.3
35.2
26.6
15.5 14.9 16.7
20.1 17.5
6.1
5.4
6.9 6.6
6.9
4.7
2.8 2.6
2.8
3.6 3.7
0
1
2
3
4
5
6
7
8
0
10
20
30
40
50
60
Jun
e 2
00
6
Jun
e 2
00
7
Jun
e 2
00
8
Jun
e 2
00
9
Jun
e 2
01
0
Jun
e 2
01
1
Jun
e 2
01
2
Jun
e 2
01
3
Jun
e 2
01
4
Jun
e 2
01
5
Jun
e 2
01
6
Mo
nth
s o
f Im
po
rts
US
$ B
illi
on
Net International Reserves
Net International Reserves NIR - to - Imports Coverage
2.9
3.9
2.6
4.9
4.5
5.5
2.6
3.7
2.3
0.9
3.7
5.5
-
1.0
2.0
3.0
4.0
5.0
6.0
2010/2011 2011/2012 2012/2013 2013/2014 2014/2015 2015/2016
Current Account Deficit %of GDP
Current Account Balance (Excluding Transfers) (% to GDP)
Current Account Balance
9
State Budget
• It is the plan for an upcoming fiscal year (starts in July 1st and ends in June 30th) to
achieve specific goals within the framework of the plan for economic and social
development and in accordance with the state policies.
• Of the most important financial and economic policy management tools through
which:
The government can prioritize expenditures as well as provide funds to cope up with
emergencies
Achieve social and economic objectives taking into account the social dimension as a
strategic objective.
• It presents the government’s forecasts for the collection of revenues (taxes, grants
and other revenues), as well as expenditures appropriations in accordance with the
economic classification (wages and compensation of employees, purchase of goods and
services, interest payments, subsidies, grants and social benefits, other expenditures,
and investments) during a full fiscal year.
10
State Budget
• State budget is the most important annual document prepared by the government
and submitted to Parliament for discussion and approval.
• It also includes expenditures in accordance with the functional classification (health,
education, social protection, defense and national security…etc.)
• The preparation and presentation of the state budget abides by GFS 2001
classification prepared by the International Monetary Fund (IMF), but on cash basis
and not on accrual basis.
• The budget also includes public debt service obligations including loan repayments
and government bonds maturing during the fiscal year, in addition to expected
financing needs plan and sources of finance.
• State Budget includes all the resources and uses of the budget sector including the
central administration, local governments and public service authorities.
11
Legislative framework for the state budget
• Law No. (53) of 1973, as amended, is the primary focus of the fiscal performance. It
is the comprehensive law governing the general state budget based on the following
principals:
The state budget is the plan for an upcoming fiscal year to achieve specific goals within
the framework of the plan for economic and social development and in accordance with
the state policies.
The fiscal year starts in July 1st and ends in June 30th
The state budget is based on the principle of generality and inclusiveness, which
includes (by law) all uses and resources of the central administration, local governments
and public service authorities. However, it does not include economic authorities
budgets.
The budget includes contingencies without being bound by economic classification, in
order to meet national inevitable obligations, emergencies, expenses or commitments
that were not taken into account while preparing the budget.
12
Legislative framework for the state budget
Budget Circular
End of September
Entities prepare
their budgets
Entities’ proposals
MoF’s Budget Sector
Feedback
MoP proposal - Investme
nts
Presented to Minister of Finance
Presented to Ministers’
council Early March
Presented to President
then to parliament
End of March
Parliament Discussions
Budget law
End of June
Execution
July 1st
13
Structure of State Budget
State Budget
Central Administration
Local Governments
Public Service Authorities
Private financing
funds
Public institutions budgets that are
not included in the state budget
Economic Authorities
Public Sector Enterprises
Law 203, 1991
Budgets of Banks abiding by law No. 117, 1976 and law
No. 88, 2003
Budgets of enterprises abiding by law No. 159, 1981
14
Relationship between budget and other public institutions
State Budget
other public institutions
Budgets (Not included in
state budget)
Subsidies, capital contributions and
loans
Surplus
15
State Budget Classification: Administrative Classification
• Central Administration: includes all ministries, presidency, Council of Ministers and
the Administrative Control Authority's (152 Budget Entity)
• Local governments: it includes governorates and affiliate services directorates (323
Budget Entity)
• Public service authorities: include universities and independent service authorities
(150 Budget Entity)
16
State Budget Classification: Economic Classification
Economic
Classification Item
Economic
Classification Item
1 Resources 2 Uses
11 Revenues 21 Expenditures
111 Chapter 1: Taxes 211 Chapter 1: Wages and Compensation of employees
112 Chapter 2: Grants 212 Chapter 2: Purchase of goods and services
113 Chapter 3: Other Revenues 213 Chapter 3: Interest Payments
214 Chapter 4: Subsidies, Grants and Social Benefits
215 Chapter 5: Other Expenditures
216 Chapter 6: Purchase of Non-Financial Assets (Investments)
12 Receipts from Acquisition 22 Acquisition of Financial Assets
124 Chapter 4: Receipts from lending,
sales of financial and other assets 227 Chapter 7: Acquisition of domestic and foreign financial assets
13 Sources of Finance: Borrowing 23 Loans Repayment
135 Chapter 5: Borrowing 238 Chapter 8: Domestic and Foreign Loans Repayment
17
State Budget Classification: Functional Classification
Code Functional Sector
1 701 General Public Services
2 702 Defense and National Security
3 703 Public Order and Public Security
4 704 Economic Affairs
5 705 Environment Protection
6 706 Housing and Public Utilities
7 707 Health
8 708 Youth, Culture and Religious Affairs
9 709 Education
10 710 Social Security
18
FY16/17 Budget – Key Remarks
6.9
8.1
9.8
10.1
13.0
12.2
11.5
8.9
9.8
5
6
7
8
9
10
11
12
13
14
200
8/2
00
9
200
9/2
01
0
201
0/2
01
1
201
1/2
01
2
201
2/2
01
3
201
3/2
01
4
201
4/2
01
5
201
5/2
01
6B
udg
et
201
6/2
01
7B
udg
et
% t
o G
DP
Overall Fiscal Deficit
19
FY16/17 Budget – Key Remarks
20
FY16/17 Budget – Key Remarks
21
FY16/17 Budget – Key Remarks
General Public Services, 26, 17%
Defense and National Security, 0, 0.03%
Public Order and Public Security, 4, 3%
Economic Affairs, 17, 12%
Environment Protection, 1, 0%
Housing and Public Utilities, 76, 52%
Health, 8, 5%
Youth, Culture and Religious Affairs, 4, 3%
Education, 11, 8%
Social Security, 0, 0.1%
Functional Classification of Investments - FY16/17
22
Public Financial Management (PFM) Reforms
Create a Macro-Fiscal Policy Unit
Establish a PFM unit that has multiple mandates; internal auditing, government accounting, contingent liabilities and fiscal risks
Establish a unit for Public Debt Management and Public Debt Automation (DMFAS)
Automation of stages of state budget preparation
Application of Electronic Payment and Collection
Establishment of Treasury Single Account (TSA)
Activate the electronic collection of the Egyptian Customs Service and the system of current accounts
Activate the electronic collection of the Egyptian Tax Service
The partial application of government financial management information system GFMIS
The partial application of automation of the wage system (Payroll)