Rising debt costs swallow Egypt’s fiscal gains in FY through February

Egypt’s fiscal performance showed a modest improvement during the first eight months of the current fiscal year, with the budget deficit narrowing to 4.6% of GDP — a 0.2 percentage point decrease from the same period last year, according to a report from the Finance Ministry seen by EnterpriseAM. Driving the deficit reduction was a near-doubling of the primary surplus to EGP 656.8 bn — equivalent to 3.1% of GDP.

The ministry attributed the stronger performance to a 39.7% increase in total revenues to EGP 2.0 tn, driven primarily by a 31.0% rise in tax receipts to EGP 1.6 tn following the implementation of the first package of tax facilitations. Non-tax revenues also more than doubled to EGP 400.8 bn during the period.

But rising debt servicing costs continued to absorb much of the improvement, with interest payments climbing to EGP 1.6 tn — the same amount raised from total tax revenues. Expenditures rose at a slower 28% pace than revenues to reach a nonetheless larger EGP 2.9 tn.

Why this matters: While the 3.1% primary surplus points to ongoing fiscal consolidation, the fact that interest payments continue to absorb 100% of tax revenues highlights a key structural challenge. Sustaining the improvement will hinge on the government’s ability to maintain revenue momentum while managing elevated interest rates.