Assessing fiscal sustainability in Egypt: a comparative study

Ola Al Sayed,Heba Hesham Anwar,Ashraf Samir

doi:10.1108/reps-02-2020-0020

Ola Al Sayed, Heba Hesham Anwar + Show 1 more

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https://doi.org/10.1108/reps-02-2020-0020

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Abstract

PurposeThis paper aims to assess the fiscal sustainability in Egypt during the period 1990–2018 using deficit accounts (DA) approach. It also tries to investigate the possibility of applying generational accounts (GA) in Egypt as a new approach to assess fiscal sustainability.Design/methodology/approachThis paper tries to assess fiscal sustainability in Egypt during 1990–2018 using DA and GA approaches. DA approach includes primary deficit indicator, tax gap indicator, augmented Dickey-Fuller stationarity test for debt/GDP ratio and Johansen co-integration test between government revenues and expenditures. However, concerning the possibility of applying GA in Egypt, field study form was designed including specific questions to academic and executive economic experts to investigate if it is possible to apply GA in Egypt.FindingsThe empirical findings of the field study indicate that Egypt witnessed fiscal sustainability during the period 1990–2018 using DA. On the other hand, there are various obstacles, including administrative, technical, legal and political obstacles which hinder Egypt from applying GA to assess fiscal sustainability.Originality/valueTo the best of the authors' knowledge, this paper assesses fiscal sustainability in Egypt using DA for a longer and updated time series within 1990–2018. In addition, it is the first paper to examine the possibility of assessing fiscal sustainability using GA approach in Egypt.

Highlights

The current period has witnessed a growing interest in analyzing fiscal sustainability in many indebted countries in the world
5.1 Empirical results of mathematical methods for assessing fiscal sustainability in Egypt According to primary deficit indicator, the ratio of the primary deficit to the gross domestic product continues to decrease from 1990/1991 till 2017/2018, as it was about 4.9% in 1990/1991 it decreased to 0.8% in 1992/1993, and turned into a primary surplus in 2006/ 2007 with a ratio of À0.7%
A primary surplus was achieved for the second time at the end of the fiscal year 2017/2018, as it reached À0.3%, due to the implementation of the Economic Reform Program in Egypt that was concluded with the International Monetary Fund in November 2016, meaning that fiscal policy is sustainable in Egypt during 1990/1991–2017/2018

Summary

Introduction

The current period has witnessed a growing interest in analyzing fiscal sustainability in many indebted countries in the world. In this context, this paper will apply a comparative analysis to assess fiscal sustainability in Egypt from two integrated and complementary approaches: the traditional approach “deficit accounts,” hereafter; DA and the new approach “generational accounts,” hereafter; GA. Fiscal policy is said to be sustainable when the ratio of public debt to output tends to be constant in the long term, i.e. when the ratio quickly return to its normal levels, despite the occurrence of emergent changes. The full terms of this licence may be seen at http:// creativecommons.org/licences/by/4.0/legalcode

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