Next fiscal year’s government budget pencils in 23.0% jump in revenues, 19.2% rise in expenditures

Finance Minister Ahmed Kouchouk delivered his budget statement to the House yesterday, giving us the first proper look at the draft state and public government budgets for the next fiscal year.

The key takeaways: The Finance Ministry sees growth accelerating, the primary budget surplus rising fractionally, and the deficit inching down. It’s going to spend more on debt service, subsidies, and export incentives. We have a detailed rundown below.

IN CONTEXT- 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 to help improve the state’s financial indicators by accounting for the entirety of the state’s revenues. This year’s General Government Budget includes the budgets of 40 different entities, with the government planning to incorporate the budgets of other units into the budget over a five-year period.

MACRO OBJECTIVES-

Egypt’s real GDP growth is expected to accelerate to 4.5% in the coming fiscal year, up from an estimated 4.0% in FY 2024-25 and in line with recent government forecasts. The government is basing its outlook on a targeted average inflation rate of 13.0%, down from the current budget’s average of 19.5%. The country’s total GDP is set to reach EGP 20.4 tn, up from EGP 17.2 tn in the current fiscal year. A government source confirmed to EnterpriseAM that the draft budget was priced at USD at EGP 50.

The gov’t sees the primary surplus reaching 4.0% of GDP, up from 3.5% projected for the current fiscal year. Alongside this the deficit is expected to decrease from 7.6% of GDP estimated for this fiscal year to 7.3% of GDP in FY 2025-26, before falling further to 5.5% of GDP in FY 2026-27. The government aims to bring down the debt-to-GDP ratio to 80% by the end of June 2026 and to lower external debt by USD 1−2 bn annually, Kouchouk said.

Revenues and expenses are both forecasted to rise, with next year’s budget pencilling in a 23.0% y-o-y jump in public revenues to EGP 3.1 tn and a 19.2% y-o-y rise in expenses to EGP 4.6 tn.

Healthcare and education spending is getting a boost, with the draft budget allocating EGP 617.9 bn to the healthcare sector, including a 50% increase in allocations for state-funded treatment. The government also allocated EGP 684.8 bn for pre-university education, EGP 358.3 bn for higher education, and EGP 173 bn for scientific research. This is up from last year’s budget, wherein the government allocated a total of EGP 858 bn for education as a whole.

The gov’t also recently lowered its price expectations for oil prices, forecasting Brent crude prices averaging USD 77 per barrel from July 2025 through June 2026, down from its previous forecast of USD 82 a barrel in the FY 2024-25 budget, a government source told EnterpriseAM last week. The estimated price could be higher than actual oil price levels during the year, our source suggested, saying that indicators are pointing towards a global dip in oil prices at large.

But other important commodities like wheat are expected to rise. The government is expecting wheat prices through the 12-month period to average at USD 280 a ton — up from USD 240 estimated for the current fiscal year.

MONEY IN, MONEY OUT-

The Madbouly government is aiming to raise some EGP 2.6 tn in tax revenues in the upcoming fiscal year through implementing existing tax facilitation laws and introducing new facilities on customs and real estate taxation — all without imposing additional tax burdens, Kouchouk said.

Taxes on goods and services will make up the bulk of total tax revenues with some EGP 1.1 tn, followed by income taxes with EGP 915.7 bn. Taxes on yields on treasury bills and bonds will come in at EGP 322.1 bn, while customs will make up EGP 135.7 bn of total revenues. Finally, real estate taxes will account for EGP 18.0 bn, with other taxes making up the remaining EGP 122.9 bn.

The tax policy for the upcoming fiscal year has a number of objectives. The main aims of the government’s tax policy for the year include making progress in implementing the package of customs facilitation, the implementation of real estate tax reforms, broadening the tax base with minimal impact on inflation rates, as well as continuing the implementation of tax facilitation measures and ensuring they achieve their intended purposes and targets.

Interest spending is set to make up the majority of the government’s total expenses with some 50.2% of its total spending (EGP 2.3 tn), with subsidies coming in second place with 16.2% (EGP 742.5 bn). This is followed by wage payments (14.8%) with EGP 679.1 bn allocated.

As for subsidy spending:

• Food subsidies will total some EGP 160 bn;
• Pension spending will come in at EGP 153.4 bn;
• Subsidies on fuel products are set to come in at EGP 75 bn — down from EGP 154.5 bn in FY 2024-25;
• Electricity subsidies will come in at EGP 75 bn;
• Subsidies on the Takaful and Karama program will make up EGP 54 bn;
• Healthcare subsidies will make up EGP 15.1 bn;
• Housing subsidies for low-income people will make up the remaining EGP 13.6 bn.

The budget also allocated more support to exports, allocating some EGP 78 bn towards supporting industrial and export activity, including EGP 44.5 bn for export subsidies and EGP 29.6 bn in subsidies for industrial production. Kouchouk said this comes as part of an effort to prioritize “growth, stability, and partnership” with the local business community.

There will also be a greater emphasis on incorporating the informal economy, Kouchouk said, adding that the government is working to gradually increase tax revenues as a percentage of total GDP to reach 13% next year — the highest rate in 10 years.

The new budget was prepared as part of a larger plan extending for an additional three years, Kouchouk said. The government expects public expenditure in the budget to grow by 8% in FY 2026-27, and by 15% during the fiscal years FY 2027-28 and FY 2028-29. Tax revenues are expected to go up to EGP 3.9 tn in FY 2027-28, and EGP 4.7 tn in FY 2028-29, driven by a combination of improved economic activity, automation, and the expansion of the tax base, Kouchouk added.

And the Planning and International Cooperation’s Economic and Social Development Plan has raised the public investment ceiling to EGP 1.2 tn, which will be complemented by EGP 1.9 tn in private investments — representing 62.7% of the total. Under the plan, total investment will rise from EGP 2.6 tn to EGP 3.5 tn.

KOUCHOUK ALSO GAVE US A 9M UPDATE FOR THE CURRENT FY-

Despite challenges, the state’s finances have been in a decent shape as we approach the end of 9M FY 2024-25, according to Kouchouk. The primary surplus is up to EGP 435 bn — equivalent to 2.5% of GDP — even though revenues from the Suez Canal and petroleum sector have taken a beating. Public revenues are up 32% y-o-y, outpacing a 24% y-o-y uptick in expenditures in the nearly nine-month period since July 2024.

Increased tax revenues have helped push revenues up, with the taxman collecting 38% y-o-y more than he did in the same period last year. Dragging on revenues were a 37.5% y-o-y increase in petroleum subsidies, a 37% y-o-y jump in subsidy support, 24% y-o-y uptick in Takaful and Karama payments, a 27% y-o-y rise health spending, 23% y-o-y more for education, and a 78% y-o-y more being allocated to export support.

Investments from Egypt’s private sector made up more than 59% of total investments during the period, Kouchouk noted — representing a 80% annual growth rate. Fostering an environment that empowers private sector-led growth was among the key requirements of Egypt’s USD 8 bn program with the International Monetary Fund.

And there was encouraging news on the deficit front, which declined to 6.3% of GDP. In the same period the debt of government agencies included in the budget declined by USD 1 bn.