Daily News Egypt

Global economic risks negatively affect draft budget for next year: parliament's planning committee - Daily News Egypt

Advertising Area



Advertising Area



Global economic risks negatively affect draft budget for next year: parliament’s planning committee

US raising short-term interest rate tightens conditions of Egypt’s external financing


A report from parliament’s planning and budget committee said the risks of changes in the global economy are negatively affecting the draft budget for the next fiscal year (FY).

The report, obtained by Daily News Egypt, states that the expected increase in interest rates on dollar-denominated bonds, with the US government raising short-term interest rates in March to about 1.5-1.75%, could lead to a tightening of external financing conditions as Egypt moves to issue bonds in foreign currency to meet the needs of financing the budget deficit.

Finance Minister Amr El-Garhy said in a press statement that he intends to issue international bonds worth $6-7bn.

Raising the interest rate on US bonds will lead to capital outflows from developing countries, with potential pressure on interest rates and rising external debt burdens, the planning and budget committee said.

Egypt’s external debt rose to $82.9bn at the end of December, according to the Central Bank of Egypt in March.

The report said that a rise in the price of Brent crude carries a risk, as it stabilised at the same levels of prices achieved during the fourth quarter of 2017 to range between $65 and $70 and allocations are based on a price of $67.

The draft budget forecast the stability of Brent crude at $55-65 per barrel, but said it may witness an increase in the next few days to reach nearly $80.

The government also estimated the price of imported wheat on the basis of $184 per tonne, and up to $220 after adding the cost of transport.

The price of Russian wheat purchased by the Egyptian government recently reached $234.5, at $218 per tonne and $16.5 for transport fees, while the price of Ukrainian wheat was $235 per tonne.

The report pointed out that the political changes witnessed by the region in some countries of the Middle East negatively impacted investors’ view of the region and the movement of international trade.

The report predicts that the rate of international trade will decline by 3.9-4% over the next FY compared to 4.2% during the current FY as a result of Britain’s exit from the European Union resulting in a potential impact on the movement of trade to and from Europe and thus the movement of trade and investment in Egypt.

The planning and budget committee also expressed concern about the increasing global trend towards the adoption of protectionist trade policies that may adversely affect the growth and employment opportunities in a number of developed and developing countries and change the local exchange rate from the current situation. Such measures may also impact revenues and dollar expenditures such as in the cases of the Suez Canal, subsidies, and fuel prices.

Topics: budget parliament

Advertising Area



https://wwww.dailynewssegypt.com/2018/06/03/global-economic-risks-negatively-affect-draft-budget-for-next-year-parliaments-planning-committee/
Breaking News

No current breaking news

Receive our daily newsletter
Subscribe