Egypt aims to cut deficit but energy subsidies set to rise

• Deficit cut to 6.1% in 2025-26
• Revenues to rise 28%
• Subsidies for power and housing

Egypt plans to narrow its fiscal deficit to 6.1 percent in the 2025-2026 fiscal year, ending June 30, finance minister Ahmed Kouchouk has said.

The fiscal deficit is expected to narrow further to 4.9 percent of GDP in 2026/2027, the minister said in a cabinet statement over the weekend. 

The government aims to generate a primary surplus of 5 percent of GDP in 2026/2027, compared with 3.5 percent or EGP 750 billion ($14.1 billion), recorded in the first nine months of the current fiscal year.

The budget is based on an average oil price of $75 per barrel, with energy subsidies likely to fall to around EGP120 billion ($2.3 billion) in the new fiscal year.

Kouchouk said the government aims to reduce the debt-to-GDP ratio to 78 percent by June 2027 and lower external debt by $1 to $2 billion annually. 

External debt has declined to $78 billion, he said, adding that the plan is to lower debt-servicing costs to 35 percent of total expenditure over the medium term.

Total revenues are expected to reach EGP4 trillion in 2026/2027, up 28 percent year on year, driven by a 27 percent rise in tax revenues.  

Expenditures are projected at EGP5.1 trillion, an annual increase of 13 percent. Budget allocations for health and education will grow by 30 percent and 20 percent, respectively, exceeding overall spending growth.

The government will allocate EGP90 billion for production, manufacturing and export promotion, including EGP48 billion for export subsidies. It has allocated EGP7 billion for tourism development and EGP6 billion in financing facilities for the productive sectors.

Electricity subsidies will reach EGP104 billion, while EGP13 billion will support housing for low- and middle-income groups.  

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Kouchouk said a high-level delegation is anticipated to head to the US this week to participate in the spring meetings of the International Monetary Fund and the World Bank Group. The delegation will discuss the measures to be implemented under the remaining two reviews of the outstanding $8 billion extended fund facility. The programme is scheduled to conclude by December 15.

Last week a report said that Cairo is reportedly weighing securing emergency financing of between $1.5 billion and $3 billion from the IMF.

The IMF expanded its initial $3 billion loan facility, approved in December 2022, to $8 billion in March 2024 to help Cairo address rising inflation and foreign-currency shortages.