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Mon 2 May 2011 07:44 PM

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Egypt's budget deficit set to widen to 9.38%

Decline in tourism and business activity since the unrest broke out has hit tax revenues

Egypt's budget deficit set to widen to 9.38%
Egypts stock exchange. (Getty Images)

Egypt's state budget deficit,

bloated after political turmoil rocked the economy, is forecast

to widen to 9.38 percent of gross domestic product (GDP) in the

2011/12 fiscal year, the country's finance minister said.

That compares with an expected deficit of about 8.5 percent

for the 2010/11 fiscal year ending on June 30, Samir Radwan told

Reuters on Monday.

Soaring prices and high unemployment fuelled pro-democracy

protests that brought down President Hosni Mubarak in February

after 30 years in power in the Arab World's most populous state.

Economists say a decline in tourism, consumption and

business activity since the unrest broke out has hit tax

revenues, which make up about 60 percent of government income.

The government has also boosted social spending in response to

protestors' demands for jobs and higher wages.

The draft budget due to be presented to the cabinet foresees

revenue of 342.6 billion Egyptian pounds ($57.6 billion) and

spending of 500.7 billion pounds, Radwan said.

Before the unrest, Egypt had predicted a deficit of 7.9

percent of GDP for fiscal 2010/11, but later revised that

upwards to 8.2 to 8.4 percent.

Planning and International Cooperation Minister Faiza Abu

el-Naga announced on Monday a development plan worth 230 billion

pounds to kick-start the economy after Mubarak's ouster.

She said that 55 percent of the plan, which still needs to

be approved by the government, would come from the private

sector. The rest would come from the public sector.

"The hope is that the private sector - local, Arab and

international investors - will contribute to this plan after

security returns to the country," she said.

The plan envisages adding 1.7 billion pounds for extra

spending on health, education, training and vocational

education, the minister said.

Egypt has said it is seeking $10 billion in funding from

international lenders and rich nations to help it cope with the

fallout from the mass protests that toppled Mubarak.

The country's economy contracted an estimated 7 percent in

January-March and the International Monetary Fund is projecting

a plunge in growth to 1.0 percent this year, well below its

long-term average, after a 5.1 percent expansion in 2010.

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