Egypt’s budget deficit almost doubled y-o-y in the first quarter of the current fiscal year as rising borrowing costs squeeze public finances. Figures in the Finance Ministry’s latest monthly report (pdf) show that the deficit widened to 3.9% of GDP in 1Q FY 2023-24 from 2.1% a year earlier, largely due to the government’s spiraling interest bill.

Interest payments more than double: We spent EGP 477.5 bn on debt service during the July-September quarter, more than double the EGP 216.9 bn paid out during the same period last year. The mounting interest bill significantly outpaced rising revenues: the cost of debt service alone was more than 40% higher than total revenues during the quarter.

Remember: Egypt is expected to spend at least USD 42.3 bn on foreign debt repayments in 2024, according to central bank projections out last week.

The FinMin’s crystal ball: In the FY 2023-24 state budget, the Finance Ministry forecast:

  • the budget deficit to widen slightly to 7.0% of GDP this fiscal year from 6.0% last year
  • the government’s interest bill to climb 45% to EGP 1.12 tn. We’ve already spent over 42% of this in the first quarter alone.

There’s little consensus about how much the deficit will widen through the year: The IMF expects the deficit to widen significantly to 10.7% this year, while S&P Global Ratings anticipates only a modest deterioration to 6.8%.

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