Egypt could tap global bond markets after presidential elections due May 26-27, but should the country be in dire need, it could seek aid from its wealthy Gulf neighbours, finance minister Hany Kadiri Dimian said on Friday. Political turmoil following the uprising that toppled autocrat Hosni Mubarak in 2011 has hammered the economy of 85 million people as foreign investors and tourists have fled.
While the country has been making ends meet with the help of billions of dollars from the Gulf states, there are signs these flows could dry up. The United Arab Emirates said this week it did not expect to disburse more aid. Cairo has also held off signing a loan deal with the International Monetary Fund, saying it will assess this after presidential elections due May 26-27.
Tapping global bond markets could be one option for raising cash, Hany Kadiri Dimian told an investment conference. "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. "We don't exclude (a bond) but don't expect to make a decision before the political transition is complete."
While Gulf countries pledged $12 billion in aid to Egypt last year, Dimian said Cairo was currently only receiving assistance in the form of oil products from Saudi Arabia, a programme that is to continue until August. He added: "If we need assistance, I don't believe that our Gulf brothers will not respond positively," Dimian told Reuters Television in an interview. Dimian said Egypt's budget for the 2014-2015 fiscal year does not assume any Gulf aid inflows, blowing out its budget deficit. Egypt's fiscal year runs from July 1-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," he 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."
REFORMS, DEFICIT On the positive side, elections hold out some hope of political stability and reform, especially to reduce wasteful subsidies such as on energy, which dwarf Egypt's education and healthcare spending and eat up a quarter of its budget. The subsidy bill will fall by 20 percent in the 2014-2015 budget thanks to measures to reduce energy subsidies, the minister predicted. "Our biggest task is to re-prioritise expenditures..phasing out energy subsidies is a medium-term programme, it will take us 3-5 years to break even," he said.
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