The Finance Ministry has begun drafting a state budget that marks a definitive end to the current era of economic emergency. The FY 2026-27 budget — set to be presented to Cabinet in preliminary form by late January — is being designed as a structural shift in fiscal policy, a senior government official tells EnterpriseAM.

Why this matters: This will be Egypt’s first budget in years to operate largely independently of the IMF. With the current USD 8 bn program projected to wrap up next November, the new budget is being engineered to prove that the discipline of the last two years was a policy choice, not just a conditionality.

Fiscal discipline 2.0

The budget will aim to lock in the austerity measures that gained the fund’s approval thisweek. The strict ceiling on public investment will remain — and may even be lowered further — to clear the lane for private sector participation, while ministries are again being required to submit three-year budget projections to end the cycle of surprise supplemental appropriations.

Suez is the laboratory for the end of in-kind subsidies

One of the most significant pieces of news in the draft budget is a concrete timeline for the transition from in-kind to cash-based subsidies. The government has selected Suez as the testing ground for a full switch to cash-based subsidies, the source tells us. Residents in the governorate will receive monthly cash-based allowances on smart cards redeemable at Supply Ministry outlets, replacing the current points system for bread and commodities. If the Suez pilot succeeds, the system will be rolled out nationwide over the subsequent two fiscal years.

This is the latest signal yet that the state is moving ahead with dismantling the legacy subsidy system that has historically bled the budget and replacing it with a more targeted (and capped) cash-based model. The Sisi administration has had significant success with the Takafol and Karama programs, which have rolled out conditional cash payments to low-income households with children under the age of 18 as well as to the elderly, orphans, widows, and people with disabilities.

Don’t bank on fixed fuel costs just yet

Readers should also look past the headlines on energy prices. While the government has publicly stated that fuel prices will remain unchanged until October 2026, the budget drafting process suggests a more pragmatic reality. Our source indicates the new budget explicitly does not rule out further price adjustments if global oil markets threaten to widen the deficit again.

Subsidies will be strictly limited to LPG cylinders (better known as the anbooba) and diesel. The goal is to prevent the treasury from ever again bearing the burden of the cost differential between global prices and local pumps.

Trading subsidies for salaries

To cushion low-income earners, the state is preparing a comprehensive social package that includes wage increases and targeted incentives. The government is explicitly redirecting savings from subsidy reform into direct income support, a move that carries significant implications for the private sector. If the public sector hikes wages to match inflation, private operators will likely face renewed pressure to adjust salary bands.

ALSO TO COME- A revised tax policy document is currently being drafted to reflect recent development targets and IMF feedback, with a release window now set between June and September 2026, a second senior government official tells us.

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