Negotiations with the International Monetary Fund (IMF) are ongoing, according to Finance Minister Amr El-Garhy. He said that the loan aims to achieve structural and economic achievements during the current period.
The Egyptian government aims to borrow $12bn over three years, in tranches of $4bn every year.
Egypt has obtained an approval by experts of the fund to borrow $12bn, which will see public debt decline to 88% during fiscal year (FY) 2017/2018.
El-Garhy said that the IMF loan is crucial for the Egyptian economy, and the government is working to provide a social protection programme for lower-income citizens, under the name karama wa takaful (solidarity and dignity), which will target $2m in FY 2016/2017 and $3m in FY 2017/2018.
The Finance Ministry aims to increase tax revenues to 16-17% of the gross domestic product (GDP), according to El-Garhy. He noted that the government has already started the tax reform process in the past few days.
Ahmed Kojak, deputy finance minister for monetary policy, said that the country will obtain the first portion of the IMF fund a few days following the fund’s management’s approval. The portion is estimated at $2.5bn.
The parliament approved the value added tax (VAT) at 13% in FY 2016/2017 in late August, and it is expected to be increased to 14% in FY 2017/2018.
Deputy Minister for Tax Policies Amr Mounir said that he expects the VAT to achieve revenues of EGP 20bn by the end of FY 2016/2017. The amount is expected to jump to EGP 32bn in FY 2017/2018.
In an exclusive statement to Daily News Egypt, Mounir said that the executive regulations of the law will be issued mid-October.
The VAT is considered one of the most important economic reforms currently carried out by the Ministry of Finance.
The ministry aims to expand the tax community and allow the non-official economy into the system in order to decrease the overall deficit.
A source in the Ministry of International Cooperation told Daily News Egypt the approval of the VAT is one of the main conditions stipulated by IMF to provide the loan worth $3bn.
The ministry aims for the deficit to register 9.8% of GDP in FY 2016/2017.