July 5, 2018 / 10:40 AM / 2 months ago

UPDATE 2-Egypt says has primary budget surplus as seeks to revive economy

(Adds details, background)

By Ehab Farouk

CAIRO, July 5 (Reuters) - Egypt announced on Thursday it had a primary budget surplus for the first time in 15 years and said it was committed to paying oil companies’ debts by end of 2019 as it seeks to lure investors to revive a crisis-hit economy.

Cairo has enacted a raft of tough austerity measures backed by the International Monetary Fund (IMF) since 2016, hoping for a strong financial comeback as it recovers from years of political upheaval.

President Abdel Fattah al-Sisi’s government devalued the Egyptian pound by half in 2016, and has pushed through steep fuel and electricity subsidy cuts this year, in measures praised by some economists but lamented by many Egyptians who say they are struggling with soaring living costs.

Finance Minister Mohamed Maait said Egypt achieved a 0.2 percent primary budget surplus, worth 4 million Egyptian pounds ($223 million) in its 2017-2018 fiscal year. It is aiming for a 2 percent primary surplus in the current fiscal year.

Egypt’s fiscal year runs from July to June.

Primary budget figures do not factor in interest payments on government debt.

The country expected its 2017-2018 budget deficit to stand at 9.8 percent, slightly above the 9.1 percent it said last year it was targeting.

Maait told reporters that revenues expected from the 2018-2019 budget were around 989 billion Egyptian pounds ($55 billion), 817 billion of which would be spent on debts and interest.

Foreign reserves rose by the end of June to $44.258 billion from $44.139 billion, the central bank announced separately, continuing their climb since Egypt secured the $12 billion IMF loan.

GAS DEBTS DOWN

Egypt wants to woo foreign investors and increase other crucial sources of income such as tourism, which declined drastically in recent years because of political unrest and a precarious security situation, although tourism revenues have recently picked up.

A 2011 popular uprising which toppled ex-president Hosni Mubarak was followed by years of unrest, including the Sisi-led ouster of Islamist president Mohamed Mursi in 2013, and attacks by Islamic State insurgents in the restive northern Sinai Peninsula against security forces and then civilians.

Sisi’s supporters say the security situation has greatly improved during his presidency - although critics say it has come at the cost of a harsh political crackdown.

The discovery of large amounts of offshore gas in Egyptian waters, including the giant Zohr gas field, has caused hope for another source of revenue with Egypt as a potential gas hub for the region.

Petroleum Minister Tarek El Molla told reporters on Thursday Egypt was committed to paying off its debts to foreign oil companies by the end of 2019.

Those debts stood at $1.2 billion at the end of June, their lowest since 2010 when they were around $1.3 billion, he said.

El Molla repeated that Egypt intended to increase production from the Zohr field to 2 billion cubic feet of gas per day by the end of this year - up from current levels of around 1.2 billion.

Discovered in 2015 by Italy’s Eni, Zohr contains an estimated 30 trillion cubic feet of gas. (Reporting by Ehab Farouk; Writing by John Davison; Editing by Mark Heinrich and Toby Chopra)

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