The Madbouly government expects its financing gap to shrink to EGP 2.7 tn in the upcoming FY 2026-27 budget, down from EGP 3.6 tn in the current fiscal year, a senior official tells EnterpriseAM. This optimism is backed by anticipated improvement in economic indicators and higher tax revenues, with the Finance Ministry expecting EGP 2.7-3.0 tn in tax collection as part of EGP 4 tn in total public revenues. These funds would go toward covering a total spending bill of EGP 5 tn.

Why it matters: Although we are caught in the midst of a regional crisis, the government is hopeful it will get some breathing room from the pressure of securing emergency funding so it can focus on issuing longer-term debt. If the government’s optimistic scenario plays out, this means the cost of borrowing for businesses to expand operations, build factories, or manage cashflow will get significantly cheaper next year.

Two scenarios modeled: In an optimistic scenario, assuming regional tensions end quickly, economic growth could reach 5.4%, and the budget deficit could narrow to 4.9%. If the crisis persists, the government is bracing for a deficit of 5.5% — still a marked improvement over the 7.3% projected for the current fiscal year. “We expect the current crisis to end and foreign investment inflows into debt instruments to return, which will drive down the average interest rate to a target of 17% during the next fiscal year, compared to a current average of 25–26%,” we’re told.

Looking ahead: The government is leaning on its new public debt strategy to push average debt maturities to between 2.5–3 years, with a medium-term goal of reaching 4.5–5 years, we’re told. Longer-term bonds will account for the bulk of the financing needed to bridge the gap, while short-term treasury bills will continue to make up a significant share of issuances given the still-elevated interest-rate environment.

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