World Bulletin/News Desk
Egypt does not exclude tapping global bond markets to raise cash but is unlikely to do so before its election cycle is over, finance minister Hany Kadry Dimian said on Friday.
Political turmoil following the uprising that toppled autocrat Hosni Mubarak in 2011 has hammered the economy of 85 million people and hit government finances as foreign investors and tourists have fled.
The country could introduce an additional 5 percent tax rate on high-income earners and also hopes that a value-added tax will be fully in place by next March to help improve budget finances, Dimian said at an investment conference in London.
Egypt has been making ends meet largely with the help of billions of dollars from Gulf states but the United Arab Emirates said this week it was unlikely to disburse more aid.
Dimian said Egypt is receiving aid only in the form of oil products from Saudi Arabia at present but that wealthy Arab neighbours would not stand by if further assistance was needed.
"We have not received cash aid from the Gulf this month but we are receiving in-kind assistance in the form of petroleum products from Saudi Arabia. This will continue until August," Dimian told the conference.
"I do not expect the Arab countries will stand still if Egypt is in need of assistance."
He said the budget deficit is likely to rise in fiscal year 2014-15 as the budget does not assume any of the financial aid from overseas that has helped cushion the economy during the fiscal year that ends on June 30.
"Under the 2014-15 fiscal year budget, our deficit will be around 14 percent. If we don't do anything (on subsidies) this is our budget deficit," Dimian said.
"This 14 percent number does not include any grants. This year's deficit we expect at 11.5 percent of GDP as we benefited from the big cash grants coming from Arab countries."
Dimian also said Egypt expected its subsidy bill to be reduced by 20 percent in 2014-15.
Cairo has launched two stimulus packages of around 30 billion Egyptian pounds ($4.3 billion) apiece.
Tapping global bond markets could be an option to boost its finances, Dimian said: "We don't exclude it but don't expect to make a decision before the political transition is complete.
"We don't exclude any tool that will help us finance ourselves. Our (credit default swaps) have come down quite significantly," he added, referring to the cost of insuring the country's debt against default.
The finance minister said the political transition would be complete after parliamentary elections later this year. The country will hold a presidential vote on May 26-27.
The government is under pressure to cut energy and food subsidies which eat up a quarter of the state's budget. Dimian warned that companies' profits could fall as the government phases out energy subsidies as part of structural reforms.Last Mod: 16 Mayıs 2014, 14:49