How Deficit Levels Are Set

Former Finance Minister Mohamed Maait explained that the budget deficit is determined by comparing government spending—after requests have been reviewed and some spending rationalized—with expected revenues from taxes, customs duties, and other sources. The government may aim to keep the deficit at 5% of GDP, equivalent to about 1.5 trillion Egyptian pounds in the example he cited. If spending rises, the government has two options: rationalize expenditure or borrow more if savings are insufficient and no additional revenues are available. Maait noted that oil prices rising above the level assumed in the budget—for example, from $70 a barrel to $110 or $117—could add costs and increase the deficit.

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