Egypt’s government has signed off on a new state budget worth 4.6 trillion Egyptian pounds ($91 billion) for the 2025/26 fiscal year, reflecting significant increases in both expenditures and revenues as the country continues its economic restructuring under the supervision of the International Monetary Fund (IMF).
Spending and Revenue on the Rise
Government expenditures will jump by 18% compared to the current fiscal year, reaching 4.6 trillion pounds. Meanwhile, revenue is projected to increase by 19%, hitting 3.1 trillion pounds. This leaves a budget deficit of roughly 1.5 trillion pounds ($30 billion), underscoring the government’s ongoing efforts to balance its books while managing economic pressures.
One major factor influencing the rising costs is inflation, which stood at an annual rate of 12.8% in February. Although inflation has significantly cooled from its September 2023 peak of 38%, it remains a concern as Egypt implements financial adjustments under the IMF programme.
IMF Support and Economic Targets
Egypt’s economic roadmap is shaped by an $8 billion IMF-backed reform plan introduced in March 2024. This month, the IMF approved the disbursement of $1.2 billion to Egypt following a fourth review of the programme.
The new budget aims for a primary surplus of 795 billion pounds, equivalent to 4% of GDP, an improvement over the initially projected 3.5% for 2024/25. However, despite these improvements, the IMF granted Egypt a waiver after the primary surplus in the last fiscal year fell short by 0.5% of GDP.
Debt Reduction and Social Spending
One of the key targets in the 2025/26 budget is reducing Egypt’s public debt. The government plans to bring the debt-to-GDP ratio down to 82.9%, a notable drop from the expected 92% in the current fiscal year.
At the same time, the budget allocates significant resources to subsidies and social benefits, demonstrating an effort to balance fiscal discipline with social support. Key allocations include:
- 732.6 billion pounds for subsidies, grants, and social benefits (a 15.2% increase)
- 160 billion pounds for commodity and bread subsidies (a 20% rise)
- 75 billion pounds each for petroleum and electricity subsidies
- 3.5 billion pounds to support natural gas deliveries to households
Future Challenges and Economic Outlook
Egypt’s financial policies have drawn mixed reactions. On one hand, the IMF has lauded the government’s tight control over spending, particularly in its third review in June 2024. On the other hand, concerns remain over the country’s economic resilience amid ongoing global financial uncertainties and domestic inflationary pressures.
The government’s focus on fiscal discipline, combined with IMF backing, suggests that Egypt is committed to stabilizing its economy. However, the effectiveness of these measures in improving living standards and sustaining growth remains to be seen in the coming months.
