The Finance Ministry is targeting a reduction in the budget deficit to 5.5% in the FY 2026-27 budget, down from 7.3% in the current fiscal year, a government official tells EnterpriseAM. While the ministry had initially aimed for a more ambitious 4.9% deficit in its preliminary draft, the revised 5.5% target reflects a recalibration to account for ongoing regional geopolitical tensions.

The ministry is banking on a significant increase in state resources to help narrow the deficit. “We hope that the expected increase in revenues will support the deficit reduction forecasts,” the source said. Total revenues are projected to reach EGP 4 tn, up from EGP 3.1 tn, with tax and fee receipts expected to touch the EGP 3 tn mark for the first time, rising from EGP 2.6 tn in FY 2025-26, buoyed by the anticipated rollout of the government’s second tax facilitation package.

Spending growth is expected to moderate as the government pushes ahead with austerity measures and energy subsidy cuts, with public expenditures forecast at EGP 4.9 tn. Despite the belt-tightening, the ministry is aiming to maintain a primary surplus of 4%, while working to reduce the public debt-to-GDP ratio and lower debt servicing costs.

To mitigate the impact of subsidy reforms, savings from fuel subsidy cuts will be directed toward social support programs, including increases in pensions, social grants, and the Takaful and Karama conditional money transfer program. The wage bill is set to exceed EGP 750 bn, driven in part by a new minimum wage increase for public sector workers.

What’s next? The cabinet will submit the final draft budget to the House of Representatives by the end of this month.

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