More on next fiscal year’s budget: The Finance Ministry yesterday released its preliminarybudget report (pdf) for fiscal year 2024-2025, giving us a peek into government’s growth, inflation, deficit, and primary surplus targets for the year to come.

TL;DR: Growth projection slashed again to 4.0% | Inflation targets revised upwards to an average of 18.1% | Budget deficit to widen slightly by 0.1 percentage point to 7.3%.

GROWTH-

Growth forecast for the next fiscal year down: The Madbouly government now sees the economy growing at a 4.0%clip in the coming fiscal year, down from the 4.1% penciled in for the current fiscal year and from the 4.2% projection the government made in March.

This is less optimistic than the IMF and World Bank’s latest predictions this week, even after the IMF dampened its expectations of growth for FY 2024-25 to 4.4% in its updated World Economic Outlook, down by 0.3 percentage points from its last projection in January. The World Bank also has a more optimistic outlook in its forecasts this week and expects the country’s economic growth to pick up to 4.2% in the next fiscal year.

INFLATION-

Less ambitious inflation targets: The government now sees annual headline inflation ending FY 2024-25 at an average of 18.1%. The government blamed “increasing prices of food, fuel, and intermediate goods, and supply chain disruptions.”

But the new targets are still more ambitious than the IMF’s forecast, which penciled in inflation reaching an average of 25.7% during the same period.

THE DEFICIT-

Budget deficit to widen next year, but less than originally thought: The government now sees the budget deficit finishing the next fiscal year at 7.3% from 7.0% this year and 6.0% the year before. The government’s January forecast had initially penciled in a more optimistic 7.2% for the next fiscal year and a more pessimistic 7.5% for the current fiscal year.

The primary surplus is expected to jump 1.0 percentage point next year to 3.5%, up from the2.5% that was estimated in January. The government’s forecast of 2.5% for the current fiscal year remains unchanged.

MONEY IN, MONEY OUT-

Another good year for the taxman ahead: Revenues are expected to rise by 22.6% to some EGP 2.6 tn in the upcoming fiscal year, up from a projected EGP 2.1 tn this year. Tax revenues will make up 77.0% of that sum, coming in at EGP 2.02 tn — up 32.2% y-o-y. Non-tax revenues are expected to inch down 1.5% to some EGP 604 bn.

Spending inches closer to EGP 4 tn mark: Spending for the upcoming fiscal year is projected to increase by 29.4% to EGP 3.9 tn, with most of the spending allocations will go towards interest payments, social support, and investments.

Also worth noting:

  • Yields to rise: The average yield offered on government bills and bonds is expected to jump to 25.0% in the next fiscal year, up from an estimated 18.5% this year, which the report attributed to central banks across the globe tightening their monetary policy.
  • The government sees Brent crude prices averaging USD 82 per barrel from July 2024 through to June 2025. This is up from USD 80 per barrel this fiscal year.
  • Wheat prices are expected to ease, with US wheat averaging USD 280 per ton over the12-month period. This is down from USD 340 a ton this fiscal year and USD 424 a ton in FY 2022-2023, which saw global prices surge on the back of the disruption caused by the war in Ukraine.

Where does the budget currently stand? Finance Minister Mohamed Maait and Planning Minister Hala El Said will discuss the draft state budget and socioeconomic development plan for FY 2024-25 in the House next Sunday. The state budget and development plan will be voted on before the start of the next fiscal year on 1 July.

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