CAIRO - Egypt expects a funding shortfall of $10 billion to $12 billion in its current fiscal year, when it plans to issue $8 billion in new dollar-denominated bonds, the Finance Minister said on Monday.

Amr El Garhy also predicted economic growth between 5 and 5.25 percent in the year ending June 2018 - up around half a percentage point on a government forecast made in August.

"We want to do 6 percent (growth) in the longer term and in a sustainable way. Historically we make reforms and then 2-3 years later we fall into a trap and make mistakes," he told a Euromoney conference on Monday.

Days after floating its pound currency last November, Egypt signed a $12 billion three-year loan with the International Monetary Fun tied to sweeping economic reforms including tax hikes and subsidy cuts.

The programme has started to lure back foreign investors who fled after an uprising in 2011, and Egypt has also been negotiating billions of dollars in aid from other lenders.

Foreign borrowing and direct investment helped the economy expand 4.9 percent year-on-year between April and June.

Asked by a conference moderator about policy priorities for next year, Garhy said the government would press on with deficit- and debt-reduction efforts.

He said inflation, fuelled mainly by sharp declines in the value of the pound since it was floated, remained the key risk for the budget. Core inflation rose to 35.26 percent year-on-year in July from 31.95 percent in June, central bank data shows.

But foreign reserves have begun to recover, jumping to $36.04 billion at the end of July, their highest level since the 2011 revolt.

Foreigners invested a total of $17.6 billion in Egyptian debt instruments between the pound float and mid-September, Deputy Finance Minister Ahmed Kojak told Reuters earlier on Monday.

(editing by John Stonestreet) ((+44 207 542 4441))