Fresh details on the General Government Budget for FY 2025-26: The General Government Budget is set to rise to somewhere in the vicinity of EGP 8 tn in the fiscal year 2025-2026, up from EGP 6.6tn in the current fiscal year, as the Madbouly government looks to incorporate additional state economic bodies’ budgets into the budget, a government source told EnterpriseAM. The addition of these new entities is also expected to increase the government’s overall public revenues, the source said.

REMEMBER- The government last year amended the Unified Budget Act to allow for the budgets of all 59 of the state’s economic bodies and the state budget to be presented in the General Government Budget — a consolidated budget that would help improve the state’s financial indicators by accounting for the entirety of the state’s revenues. This year’s General Government Budget presented 40 economic bodies’ budgets, with the government planning to incorporate the remaining economic bodies’ budgets into the budget gradually over a five-year period.

It remains unclear which entities are set to be incorporated into the budget next year, with our source saying that this would depend on the procedures of the committee formed to restructure economic entities. The goal is to provide a better picture of the government’s overall budget, the source added.

WHAT THE NEW BUDGET COULD ENTAIL-

#1- The budget pencils in growth of around 5-5.5%, reduced public debt, and a primary surplus amounting to approximately 4% of GDP, another source told EnterpriseAM. The Planning Ministry projects GDP growth of 4.0% for FY 2024-2025 and the government is estimating a primary surplus of 3.5% for the current fiscal year.

This is higher than what international institutions are expecting: The IMF has recently slashed next fiscal year’s growth forecast by 1.0 percentage point and now expects the economy to grow 4.1% in line with the revised World Bank projection of 4.2%, down 0.4 percentage points from last summer’s projections.

#2- The government is also working on reducing the amount of funds allocated for fuel subsidies from the current fiscal year’s EGP 150 bn through issuing long-term contracts and purchasing shares of foreign oil and gas partners’ output. The upcoming fiscal year is still set to include around three new fuel price hikes as part of the Madbouly government’s plan to phase out fuel subsidies entirely by March 2026, as planned.

#3- The move to cash subsidies may wait another year: It remains unclear whether or not the government will move to replace in-kind subsidies with cash subsidies, with the National Dialogue calling for postponing the plan for an additional year until inflation levels decrease significantly, the source said.

#4- Public investments to see more austerity? The government is planning to further cut down public investments and is set to, instead, rely on self-financing through various entities and limit spending to highly urgent projects or those already nearing completion, our sources said. Private sector investments will also be encouraged in several sectors to help facilitate this, they added.

REMEMBER- The Finance Ministry introduced an EGP 1 tn public investment cap for all state entities to help create space for private players.

The priority sectors for the government will include education, healthcare, and the Decent Life program, the sources said.

A NEW APPROACH TO PUBLIC DEBT-

New public debt policy document to be launched? The Finance Ministry is looking to launch anew public debt policy document by the end of March, in which it will outline its goals and plans for domestic and foreign debt, debt offerings, and a framework for green bonds, sukuk, and international bonds, a government source told us last month. This comes as part of efforts to provide investors with a clear view of Egypt’s international debt offerings and the government’s plans to return to the international debt market.

What it could bring: With the new policy, the government would look to focus its efforts on extending maturities through diversifying debt instruments and reducing overall debt. The strategy also includes keeping external debt for state budget bodies at USD 79.1 bn, unchanged from September 2024. The government ultimately aims to reduce external debt by USD 1-2 bn in the medium term, one source said, adding that all entities have submitted their medium-term budget plans alongside the current fiscal year’s budget.

REMEMBER- Egypt’s foreign debt rose by 1.5% q-o-q to USD 155.2 bn during the first quarter of FY 2024-25, up from the USD 152.9 bn recorded at the end of FY 2023-24. Medium- and long-term debt accounted for some 82% of the country’s total foreign debt with USD 127.5 bn, while short-term debt made up the remaining USD 27.7 bn.

INTRODUCING A THREE-YEAR BUDGET-

The government is currently working on preparing the budget for FY 2025-26, all while preparing a comprehensive three-year budget with a financial ceiling that can only be exceeded in exceptional cases, one of the sources said. Government entities will also submit another budget covering FY 2026-27 to FY 2029-30. Ministries will be given cabinet-approved financial ceilings that can’t be exceeded. However, the ceiling would allow more flexibility for ministries to manage their spending by reallocating funds between different projects, provided that they remain within the allowed budget limits, according to the source.

What’s next: The Finance Ministry is looking to simplify the preparation of the General Government Budget and is working to set the maximum spending cap for each ministry this month before preparing the annual budget for submission to the House. Meanwhile, the Investment Ministry is working on coming up with a decent estimate of the country’s FX needs by meeting with the private sector, government bodies, and others. The hopefully more accurate figure is designed to help build a framework to manage the country’s FX resources in light of commodity imports, interest payments, and public debt.

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