Egypt’s new budget will reduce the country’s deficit from 10.8 per cent in the current fiscal year to 9.9 per cent of GDP in 2015/16.

The draft also projects a significant increase in social welfare programmes, with 49 per cent of the budget allocated for social spending. The government aims to spend $56bn on social welfare, which is a 12 per cent increase on the current fiscal year.  

Growth has been projected at 5 per cent, which is a slight increase from 4.2 per cent this year.

Public revenues will increase by 26 per cent to reach $80.3bn, but expenditure is expected to hit $116bn, which is up 20 per cent.

The budget also earmarks $5bn for bread and commodities subsidies.

In October 2014, the finance ministry revealed its economic targets for the next five years and, following the perceived success of the Egypt Economic Development Conference (EEDC) in Sharm el-Sheikh in March this year, Cairo remains committed to these plans.

The policy framework aims to restore GDP growth, reduce the fiscal deficit, drive job creation and increase private sector investment, with specific targets set for 2018/19.

The government aims for sustainable GDP growth of 6 per cent by 2018/19, a reduction of the fiscal deficit down to between 8 and 9 per cent of GDP, and to reduce inflation to under 10 per cent in the same time frame.

However, the most challenging hurdle is the reduction of government debt to 80-85 per cent of GDP. This will be done by cutting public expenditure and increasing state income by broadening the tax base and shrinking the informal economy.

Cairo also plans to increase income tax by 5 per cent, and healthcare and education by 3 and 6 per cent respectively.

Also, the government’s policy on fuel subsidies, which started in mid-2014, is set to continue, with the finance ministry’s budget statement saying the efforts to eliminate fuel subsidies will carry on.

To mitigate the effects of subsidy cuts on the poorest segments of society, the ministry says it will continue to provide cash transfers to the most vulnerable. The statement reconfirmed Cairo’s plans to increase spending on infrastructure as well on education and health.

Investment remains the key driver of growth across all industries, with private sector spending taking the lead role.