Our first look at Kouchouk’s policies: Finance Minister Ahmed Kouchouk held his first presser since becoming FinMin to give us a glimpse of the results of the fiscal year 2023-2024 and let us in on his strategy moving forward.

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The main message: Kouchouk stressed that improved budget figures are “meaningless” unless they translate into better economic performance, increased business competitiveness, and improved living standards.

Among the most important metrics: The government rationalized public spending by 2.2% of GDP, brought down the budget deficit to 3.6%, and achieved a primary surplus of 6.1% during the last fiscal year.

TACKLING THE DEBT BURDEN-

Debt service reduction strategy in motion: The government wants to reduce debt servicing to 35% of total government spending over the medium term, Kouchouk said, adding that the government is working on a comprehensive program to achieve this goal. Continuing to lower debt costs, extend debt maturities, and diversify the investor base, currencies, and markets should help address the debt burden.

Remember: Debt service costs — as outlined in this fiscal year’s budget — are set to reach EGP 1.8 tn, taking up around 46% of state expenditures, by our calculations.

Debt as a proportion of GDP to fall: The Finance Ministry expects the country’s debt-to-GDP ratio falling to below 85% by the end of FY 2025-26, he said, adding that the government wants to maintain an annual primary surplus to achieve this goal. The country’s debt-to-GDP ratio is expected to fall to 88.2% in the current fiscal year.

External debt fell some 4% y-o-y by the end of the last fiscal year, falling USD 3.5 bn, Kouchouk said, without disclosing the final figure. Our external debt registered record decline in May, dropping 8.4% from December 2023 to USD 153.9 bn. The average length of our foreign debt is 12.7 years, he added.

Moving forward: The state plans to turn to the local debt market over the coming period, Kouchouk said, adding that the ministry will be looking to expand its debt instruments like treasury bonds, green bonds, and sukuk. He also mentioned taking out soft loans from our multilateral partners.

BOOSTING REVENUES THROUGH HIGHER TAX COLLECTION-

No new taxes: The government has no plans to introduce new taxes, Deputy Finance Minister for Taxes Sherif Al Kilani said, calling the idea “unrealistic” in light of the current inflationary pressures.

In order to boost tax revenues, the government wants to integrate the informal economy, he added.

Tax revenues on the rise: Tax revenues grew by 30% y-o-y in fiscal year 2023-24 to recordEGP 1.49 tn, which helped push revenues up 60%, outpacing spending growth. Tax revenues went to health, education, and social support spending.

The taxman came for content creators: The Tax Authority collected EGP 4.3 bn in taxes from e-commerce businesses during the last fiscal year, EGP 2.1 bn of which were collected from content creators, according to Egyptian Tax Authority head Rasha Abdel Aal.

The blogger tax is fairly new, first introduced in2021 — All YouTubers and content creators must pay income tax, while those who earn over EGP 500k a year via local platforms must also charge VAT.

Learn more: Head over to our explainer that breaks down everything you need to know about the so-called blogger tax.

Non-tax revenues saw a huge jump: Non-tax revenues surged by 190% y-o-y thanks to the state diversifying its revenue streams, the minister said, pointing to the fund received from the Ras El Hekma agreement.

Tax policy finally coming? The long-awaited tax policy should be out during the current quarter, Al Kilani said.

A lot earlier than expected: The tax policy has been in the works for some time now and last we heard, the tax policy was to be presented for public consultation this quarter to be ready in 1Q 2025.

MORE SPENDING ON SOCIAL WELFARE-

Significant increases in social spending: Government spending on subsidies and social protection more than doubled from FY 2020-21 to EGP 550 bn — the government had penciled in EGP 530 bn in social safety spending in its draft budget.

And more to come: The state is mulling a package of social protection measures aimed at mitigating the impact of inflationary pressures on Egypt’s most vulnerable, Kouchouk said, confirming an earlier Enterprise report. The move is still being studied, he added. Our sources told us earlier this week that the government is gearing up to announce a new package of social protection measures in September, with plans to implement it starting October.

More spending on subsidies: The government spent EGP 165 bn (a 31% y-o-y increase) on fuel subsidies and over EGP 133 bn (a 10% y-o-y increase) on food subsidies, according to Kouchouk.

ALSO WORTH NOTING-

Fresh privatization targets: The government is looking to raise around USD 2-2.5 bn through the privatization of state-owned companies this fiscal year, Kouchouk said.

Remember: In April, the former Madbouly government said that it aims to raise around USD 1 bn from its privatization program in 2024, revising down initial goals of raising some USD 6.5 bn during the calendar year.

Things have been pretty stagnant on the privatization front but we’re expecting them to pick up, especially after the IMF pointed to the need for the state to accelerate efforts needed to implement the State Ownership Policy.

AND- Oil hedging contracts still on the table: Kouchouk believes that the current period is a good chance for Egypt to take out oil hedging contracts against fluctuating oil prices saying that “we won’t waste it.”

Refresher: The former government used hedging contracts throughout the fiscal year 2023-24 to hedge against rising oil prices. And a government official previously told us that the measure could be extended to other strategic commodities.

DATA POINT- The government has cleared USD 34 bn worth of goods across the country’s ports since the beginning of the year, at an average of USD 6 bn per month, Customs Authority head Shahat Ghatwary said. The figure includes 85k cars that have been stuck at ports.

And more to come? The central bank started handingout letters of credit (LCs) to importers of non-essential goods at the start of June.

FOSTERING INVESTMENT-

Lots of export subsidies paid out: The government disbursed EGP 12.9 bn in export subsidies last fiscal year, with the total amount reaching EGP 65 bn since the launch of the initiative in 2019.

And lots of support for industry: The government has spent over EGP 80 bn providing over 2.5k investors with subsidized loans.

A contraction in public investment in favor of the private sector: Kouchouk highlighted that the government’s level of public investment decreased last fiscal year, as part of state efforts to boost private investments in the economy.

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