Recent hikes raise Egypt’s tax revenues by 61%

Egypt’s tax revenues rose by 61 per cent year-on-year in the first half of the 2017/18 fiscal year that began in July, a finance ministry official said yesterday.

Revenues rose to 248.8 billion Egyptian pounds (Dh51.78bn) from 154.6bn pounds in the same period last year, Finance Ministry Deputy Mohamed Moeet said.

Egypt hiked taxes last year as part of economic reforms tied to a $12bn International Monetary Fund loan aimed at boosting growth.

IMF managing director Christine Lagarde said at an economic conference in Marrakech last month that Middle East countries should build broader tax bases to fund infrastructure projects and social spending.

GDP growth for the second quarter of the 2017/18 fiscal year rose to around 5.3 per cent from 3.8 per cent in the same period last year, Planning Minister Hala Al Saeed said yesterday.

Egypt’s fiscal year begins in July and ends in June.

The economy has been struggling since a 2011 uprising drove foreign investors and tourists away, but the IMF deal signed in November 2016 is hoped to put the country on the right track.

The tax revenue and GDP announcements came as Egypt begins approaching investment banks in a few days for a planned sale of euro-denominated bonds after successfully raising $4bn from international debt markets to finance the budget deficit and bolster foreign reserves, Finance Minister Amr El Garhy said.

The sale of €1bn (Dh4.5bn) to €1.5bn in notes will “ideally” take place in April, and Egypt wants European banks to manage it, the minister said.

On Tuesday, the government received about $12bn in offers for its dollar-denominated bonds, in what the minister described as a “vote of confidence” in the Egyptian economy.

The strategy of becoming a regular issuer on international markets will enable Egypt “to borrow easily and at relatively better pricing”, said Mohamed Abu Basha, an economist at investment bank EFG Hermes in Cairo.

While the global market turmoil last week also hit the assets of developing nations, investors are still tempted by higher-yielding emerging debt in a world that remains awash with central bank stimulus.

For the Egyptian government, however, borrowing costs on international markets remain much lower than local-currency debt.

Tuesday’s issuance completely covers Egypt’s financing gap for the fiscal year ending June 30, the finance ministry said.

It brings to $11bn the total amount of international bonds Egypt has sold since floating the currency and securing a $12bn IMF loan in November 2016.

The terms for the latest issuance were less favorable than last year’s due to the increase in global interest rates, Mr El Garhy said.

“We could’ve secured cheaper pricing since our risk position has improved since the last time we tapped the market, but the rise in yields on US Treasuries has affected us,” he said.

Egypt’s foreign-currency reserves have been steadily increasing since 2016, climbing to a record $38.2bn in January.