Egypt Targets 4.2% Growth and 2 Trillion Pound Investments for Upcoming Fiscal Year

Egypt's Minister of Planning and Economic Development, Hala El Said, announced to the parliament a targeted 4.2% growth rate and investments exceeding 2 trillion Egyptian pounds for the upcoming fiscal year. The government has earmarked EGP 40.5bn to finance various economic stimulus programmes in its new budget, designed to address ongoing global economic challenges.

The fiscal year 2024/25 budget prioritizes both economic stimulus and fiscal discipline, with a commitment to accelerate the reduction of the debt-to-GDP ratio of general government entities to less than 80% by June 2027, subject to exceptional circumstances requiring approval from relevant authorities "The government's total borrowing in the first quarter of 2024 amounted to EGP1.8 trillion, exceeding the bank's estimated financing needs of EGP1.1 trillion," according to the Central Bank of Egypt.

Egypt's economy was impacted by the signing of an $8 billion financial support package with the IMF, as well as the Gaza crisis, which caused a decline in Suez Canal revenue and tourism growth. However, the country's finances received an unexpected boost from the sale of development rights for property along the Mediterranean to Abu Dhabi for $24 billion. Egypt also allowed its currency to sharply depreciate and signed on to an IMF program.

Why this matters: Egypt's targeted growth rate and substantial investments for the upcoming fiscal year demonstrate the government's commitment to economic recovery and stability in the face of global challenges. The successful implementation of these plans could have significant implications for the country's long-term economic prospects and its ability to attract foreign investment.

Analysts expect GDP growth to climb to 4.35% in 2024/25, up from previous forecasts of 4.15%. The Egyptian pound is expected to weaken to 48.65 to the dollar by end-June 2024 and 48.25 by end-June 2025, after being fixed at 30.85 to the dollar since March 2023. Inflation is also expected to ease, declining from 33.3% in March to 22.50% in 2024/25 and 9.50% in 2025/26. The Central Bank of Egypt is expected to reduce key interest rates by 200 basis points in May, aiming to bring inflation down to 7% in the fourth quarter of 2024.

Key Takeaways

• Egypt targets 4.2% growth, 2 trillion EGP investments for 2024/25 fiscal year.
• Govt allocates 40.5 bn EGP for economic stimulus programs to address global challenges.
• Debt-to-GDP ratio to be reduced to <80% by June 2027, subject to approval.
• GDP growth expected at 4.35% in 2024/25, inflation to ease to 9.5% by 2025/26.
• Central Bank to cut interest rates by 200 bps in May, aiming for 7% inflation by Q4 2024.