{"id":561325,"date":"2021-04-04T04:00:32","date_gmt":"2021-04-04T04:00:32","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/2021\/04\/04\/egypts-primary-surplus-puts-it-on-track-to-sustainable-debt-strategy-world-bank\/"},"modified":"2021-04-04T04:00:32","modified_gmt":"2021-04-04T04:00:32","slug":"egypts-primary-surplus-puts-it-on-track-to-sustainable-debt-strategy-world-bank","status":"publish","type":"post","link":"https:\/\/enterpriseam.com\/egypt\/2021\/04\/04\/egypts-primary-surplus-puts-it-on-track-to-sustainable-debt-strategy-world-bank\/","title":{"rendered":"Egypt\u2019s primary surplus puts it on track to sustainable debt strategy -World Bank"},"content":{"rendered":"

<\/a> Eg<\/strong>ypt\u2019s primary surplus heading into the pandemic helped cushion the blow to its <\/strong>public debt<\/strong>, despite higher debt levels that gripped much of the MENA region, according to the World Bank\u2019s April 2021 MENA economic update (pdf)<\/a>. The primary surplus \u2014 a measure that strips out debt service payments \u2014 <\/strong>in FY2019-2020 reduced Egypt\u2019s need for short-term borrowing, unlike economies including Morocco, Tunisia, Bahrain, and Oman, whose increased public spending on health measures left their budgets deeper in the red. The pandemic\u2019s impact on our debt levels was only partially reflected in the report however, as Egypt\u2019s fiscal year runs from July to June, it noted.<\/p>\n

Egypt is currently running a small primary or initial budget surplus<\/strong>. The surplus is expected<\/a> to close the ongoing fiscal year at 0.6% of GDP, but the draft budget is penciling in a rebound to 1.5% in FY2021-2022, returning to levels frequently achieved before the pandemic hit.<\/p>\n

Egypt\u2019s real GDP growth rate of 3.6% in FY2019-2020 was the highest in the region,<\/strong> and well above the MENA average of -3.8%, according to data from the World Bank Macro and Poverty Outlooks cited in the report. Iran and Djibouti were the only two other countries to join Egypt and eke out positive growth. Looking ahead, Egypt\u2019s real output is forecast to expand by a slower 2.3% in FY2020-2021 and rebound to 4.5% in FY2021-2022.<\/p>\n

Egypt\u2019s debt levels will continue trending down<\/strong> despite a temporary pause to the government\u2019s debt reduction strategy during the pandemic, as authorities sought to address the growing health and education spending needs, said the World Bank\u2019s practice manager for macroeconomics in MENA Kevin Carey during a virtual event to launch the report on Friday, Ahram Online<\/a> reports. Favorable forecasts for the country\u2019s primary surplus will help achieve long-term debt targets and \u201cput the country\u2019s elevated debt levels on a downturn path,\u201d Carey said. The government\u2019s debt strategy, which was outlined a year before the pandemic hit<\/a>, seeks to bring down debt to 80% of GDP by 2022, primarily through moving toward longer-term borrowing. According to Finance Ministry figures, debt-to-GDP stood at 86.1% at the end of the FY2019-2020<\/a>, but the World Bank put the ratio a notch higher at 87.5%.<\/p>\n

And Egypt is one of the MENA countries less vulnerable to a debt crisis. <\/strong>Many MENA countries entered the pandemic with already-high debt stocks, weak output growth, and weak governance especially when it comes to policy transparency. While some of that may apply to Egypt, the country was among only three others that grew during the peak of the pandemic\u2019s effect on the global economy. \u201cIncreasing economic output remains the most sustainable way to reduce debt,\u201d the bank says.<\/p>\n

But public spending is largely what\u2019s keeping us afloat: <\/strong>Purchasing managers\u2019 index data for Egypt has remained largely in contraction territory<\/a>, rising above the 50.0 mark that signals expansion in private sector activity only three times since it rebounded from a low in April 2020, the bank noted. The pandemic\u2019s impact on tourism and textiles exports were also cited in the report as key macroeconomic threats to Egypt and other MENA oil importers.<\/p>\n

Egypt and other MENA countries stand to reap the long-term benefits of ramping up vaccine rollout programs: <\/strong>The cost to benefit ratio of vaccinating 20% of a country\u2019s population estimated at 78:1, the report said, citing a recent research paper pinning the cost of purchasing vaccines for developing countries against the long-term benefits. Effective vaccination campaigns would both help overcome a country\u2019s immediate health needs and pave the way for a quicker recovery, as well as \u201creinforce the foundation of public health infrastructure,\u201d the report added.<\/p>\n

Other takeaways from the report:<\/strong><\/p>\n