For the first time in its history, the Egyptian government sent Parliament, at the beginning of this April, 3 new indicative budgets covering the fiscal years from (2027-2023), in a move that it says seeks to adopt a medium-term budgetary framework that includes indicative fiscal targets which can be updated according to economic changes, thereby strengthening sustainability and stability over the coming years.

While Parliament is busy discussing the budgets, the budget for the next fiscal year, which begins in July, tops the controversy inside the House, and in the street as well. While the government stresses the expansion of allocations for health, education and social support, in addition to reducing the size of the debt and lowering the overall deficit target to 4.9% compared with 6.1% during the current year, observers fear continued social pressures and that revenues will fall short of covering government obligations, especially in light of the current regional tensions.

For his part, Finance Minister Ahmed Kouchouk presented next year’s budget as “a redistribution of resources in favour of service sectors that have long been described as suffering from a chronic shortage, foremost among them health and education”, announcing an increase in health allocations of about 30% and in education of 20%, and pointing out that “the priority is to improve the quality of basic services”.

Kouchouk also pointed to the allocation of about EGP 832 billion for social protection, and an increase in allocations for subsidies and for programmes for the most vulnerable groups, in addition to raising wages by about 21%, noting the disbursement of an exceptional increase of about EGP 1,000 for about one million teachers in basic education and Al-Azhar, in addition to an exceptional increase of EGP 750 for 650,000 beneficiaries in the medical sector.

The Finance Minister explained that total expenditure in the new budget grows by about 13.5%, within what he described as “the balance between fiscal discipline and responding to social needs”. According to observers, this means that the government is trying to combine two conflicting goals: reducing the deficit on the one hand, and increasing social spending on the other, an equation that often ends with discipline outweighing social expansion.

The minister explained that the budget aims to achieve a high primary surplus, which helps reduce public debt; at the same time, a considerable part of the state’s resources remains directed to debt service, not to improving services, which limits the ability of any spending increases to bring about tangible change.

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A Social Budget or Restricted Spending?

At the end of last March, the Egyptian Cabinet approved the draft budget for the new fiscal year, which begins next July and ends in June 2027. It is the largest budget in the country’s history, with expenditure reaching EGP 5.1 trillion against targeted revenues of EGP 4 trillion, and an overall deficit estimated at about EGP 1.28 trillion, while the government seeks to reduce the deficit to 4.9% of gross domestic product and lower the debt ratio to 78% by June 2027.

The new budget records an increase in public revenues of 27.6% to reach EGP 4 trillion, while expenditure rises by 13.2% to EGP 5.1 trillion, compared with the (2025-2026) budget, whose expenditure amounted to EGP 4.6 trillion and its revenues less than 3.5 trillion. This expansion comes backed by a strong primary surplus of EGP 1.2 trillion (equivalent to about 5% of GDP).

Social protection programmes top the budget’s list of priorities, with allocations reaching EGP 832.3 billion, an annual growth of 12% compared with EGP 742.6 billion in the previous year, covering subsidies for ration goods, energy, pensions and housing. EGP 90 billion has also been allocated to support economic activity and stimulate exports, with incentives linked to tangible results.

Despite the expansion in spending, the budget shows a commitment to reducing the overall deficit by about 1.2 percentage points, with a focus on reducing external debt by $2 billion annually. Nevertheless, the pressure of debt service and interest remains a major challenge, as happened in the previous year, when interest made up 50.2% of expenditure, which raises the same problem regarding the sustainability of the balance between social spending and financial obligations.

In this regard, professor of political economy Dr Karim El-Omda says that the state’s general budget is the most important financial document the government issues annually, as it is the true mirror of the state’s economic and social orientations, since it clearly reveals the priorities of public spending and whether policies lean towards supporting low-income groups, backing the business community, or striking a balance between the two.

He explains to Zawia3 that the budget is also the main tool for implementing the constitutional obligations related to spending on the health, education and scientific research sectors, the sectors to which the Constitution obliged the state to allocate specific percentages of national output, in a way that guarantees improving the quality of basic services and strengthening investment in human capital.

El-Omda points out that the chapter on subsidies, grants and social benefits remains one of the most prominent chapters of the budget, as it amounted to about EGP 830 billion, raising questions about the inclusion of nearly EGP 104 billion to subsidise electricity, despite the successive increases in its prices in recent years, and considering that this requires an official clarification of the cost structure of energy production and the mechanisms for pricing it.

He also explains that the energy subsidy file in general needs a greater degree of transparency, especially given Egypt’s reliance on a mix of local production and imports of oil and gas, which makes it necessary to clarify the bases for calculating the cost, and whether locally produced resources are priced according to world prices or according to their actual cost.

Regarding the social protection items, the economics professor draws attention to the allocation of about EGP 13 billion for social housing, expressing his hope that this amount will be increased, in addition to EGP 55 billion for the “Takaful and Karama” programme, in a way that strengthens the state’s ability to support the families most in need of care and to ease the living pressures on them.

He also describes the ration goods file as one of the vital files in the budget, given that about 60 million citizens benefit from it, noting that the breadth of the beneficiary base in this way reflects continuing economic pressures, while improved income levels in the future are supposed to lead to a gradual decline in the numbers of those in need of support.

As for government investments, he explains that they amounted to about EGP 550 billion, an increase of nearly 35% compared with the previous fiscal year, stressing that the criterion of success is not linked only to the volume of investment spending, but to the efficiency of directing it, and whether it goes to projects with a quick economic return that support production and exports and provide job opportunities, or to projects whose economic return is delayed for years.

What Has Changed?

Economic expert Abu Bakr El-Deeb, head of the Arab Thought Development Forum for Research, believes that the new draft budget reflects an attempt to reshape the relationship between the state, the economy and society at an extremely sensitive stage, in which domestic pressures intertwine with regional and international fluctuations.

El-Deeb explains to Zawia3 that the new budget moves within a limited fiscal margin, but tries to use it with the highest possible degree of efficiency: it does not make promises of uncalculated expansion, nor, on the other hand, does it slide into harsh contractionary policies; rather, it follows a middle path based on fiscal discipline while maintaining reasonable levels of social protection, considering that this balance reflects a more mature awareness of the complexities of the current stage.

He points out that the state has come to view the budget as a tool for managing the economy and directing its priorities, not merely an accounting document, noting a gradual shift in the philosophy of public investment, through rationalising the growth of government investments and redirecting them, in a way that allows greater space for the private sector to lead economic activity in the coming stage.

He adds that this orientation reflects a growing understanding that raising the efficiency of the economy is not achieved only through increased spending, but through redistributing roles between the state and the market in a more balanced way, alongside giving priority to the productive sectors, industry and exports, as the most sustainable path to addressing the foreign currency crisis and narrowing the financing gap.

El-Deeb believes that the budget also shows a clear interest in investing in the human element, through increasing allocations for health and education, expanding social protection networks, and raising wages and pensions, stressing that any economic reform cannot be limited to financial indicators alone, but must include a social dimension that eases the burdens of economic transformation and preserves social cohesion.

Regarding the government’s ability to combine increased spending on basic services with reducing public debt, the economic expert affirms that this equation is achievable, but it is conditional on improving the efficiency of public spending and broadening the tax base by integrating the informal economy, alongside more effective management of public debt through restructuring it and gradually reducing its cost.

He points out that citizens will not assess the success of the budget through the deficit or primary surplus figures, but through its direct impact on their daily lives, through price stability, improved purchasing power, the development of health and education services, and the provision of stable job opportunities for young people.

For his part, economic expert Zohdy El-Shamy says that the new draft general budget is nothing more than “variations on an old tune”, as, year after year, the same arguments and the same justifications that the government has been putting forward for years are repeated with it, in order to pass policies that have inflicted widespread damage on the economy and society, while the matter always ends in postponed promises of reform that never find their way to implementation.

El-Shamy explains to Zawia3 that the structural flaws of the Egyptian budget still exist, and that neither government policies nor the repeated agreements with the International Monetary Fund have succeeded in addressing them, pointing out that it does not achieve the principle of comprehensiveness, as it does not fully include the situation and activities of a number of entities and agencies that operate outside the traditional framework of the budget despite their expanding economic role.

He adds that chronic imbalances are still being reproduced, foremost among them the large overall deficit, which in the new draft reaches about EGP 1.28 trillion, considering that the official focus on achieving a primary surplus does not reflect the true picture of the fiscal situation, because it excludes debt interest, even though it consumes the largest share of the state’s resources.

He points out that the initial reading of the budget reveals an increase in tax revenues of about 27%, against an increase in social protection allocations of only 12%, which reflects, according to him, loading citizens with additional burdens without a parallel expansion of protection and support networks. He also considers that some of the announced items raise questions, such as what is described as pension support or fuel subsidies, stressing the need to clarify the nature of these allocations and the mechanisms for calculating them.

With regard to wages and pensions, El-Shamy says that the announced increases do not seem sufficient in the face of living pressures, noting continuing complaints about non-compliance with the minimum wage in wide sectors, alongside the low levels of pensions compared with the rising cost of living.

He stresses that the picture is becoming more complicated with inflation rates rising again in recent months, coinciding with external debt increasing once more, which imposes additional challenges on any budget that aims to improve economic and social conditions.

What Awaits the Citizen?

For his part, economic expert and member of parliament Dr Mohamed Fouad believes that the most prominent observations on the new draft budget lie in a degree of optimism in the estimates of public revenues, which at the same time are met by clear pressures on the spending side, which may create a gap between the announced targets and the actual capacity to implement them during the fiscal year.

Fouad explains to Zawia3 that combining several goals at the same time, such as increasing allocations for health and education and raising the wages item, while at the same time lowering debt levels, is an important orientation in principle, but it requires stronger economic growth rates, alongside implementing deeper and broader structural reforms than those currently on the table, for it to become achievable on the ground.

He adds that citizens do not deal with the budget from the angle of figures and macro indicators so much as they await its direct repercussions on their daily lives, whether through falling prices, improved quality of public services, or increased incomes and purchasing power.

He also points out that the continuation of deficit levels in the budget puts pressure on public finances and shrinks the space available for the government to act, and also limits the state’s ability to expand the impact of social spending and achieve tangible results for the most vulnerable groups.

Fouad stresses that judging whether the budget is “social” or not is not linked only to the size of the allocations included in its items, but to the extent of its ability to improve citizens’ standard of living, and its real and tangible impact on people’s daily lives.

Economic expert Dr Khaled El-Shafei, head of the Capital Centre for Economic Studies and Research, believes that the new draft budget does not differ much from the budgets of previous years, as it carries the same traditional character, in form and content, without including fundamental shifts or effective tools capable of bringing about a real economic leap that citizens can feel.

He adds to Zawia3 that the budget includes announced increases in some items, such as health, education and wages, which are positive in principle, but they do not rise to the level of an exceptional budget that could be considered a turning point in the economic or financial performance of the state; rather, they remain within the framework of the usual increases that recur annually.

El-Shafei explains that talk of expanding social spending in parallel with reducing public debt remains a difficult goal to achieve under current conditions, especially since debt-service burdens still absorb a large proportion of public revenues, which limits the government’s ability to direct greater resources to the service and development sectors.

He points out that any effective budget must be capable of achieving tangible results in the fields of education, health and basic services, and must be reflected directly in citizens’ lives, explaining that citizens are not waiting for figures or official indicators so much as they are looking forward to lower prices, the availability of goods, improved government services and increased purchasing power.

El-Shafei affirms that the Egyptian street is waiting for a budget that honestly expresses its needs and offers practical solutions to the crises of living, whether in relation to the prices of basic goods or daily services, especially in light of the current economic pressures and the regional tensions that have cast their shadow on the local economy.

He stresses that what is required is not merely numerical increases in the budget items, but an integrated economic vision that addresses the structural imbalances, foremost among them the crisis of external and domestic debt, the structure of public spending, the priorities of projects, and the state’s ability to grow revenues sustainably, stressing that the country needs a budget that is unprecedented in terms of efficiency and effectiveness, capable of achieving real positive indicators and bringing about a tangible improvement in citizens’ standard of living, which is what the street expects from any new fiscal policy.

Will the Attempts to Contain the Debt Succeed?

Despite the growing official talk about the priority of reducing public debt, the government is still late in announcing an integrated strategy for managing indebtedness, amid contradictory statements and a multiplicity of circulating initiatives without a clear institutional reference. So far, no official document has been published setting out the path for reducing the debt, its tools and its timetable. Meanwhile, statements range between affirming that assets will not be sold, the simultaneous promotion of exiting public companies, and talk of debt swaps, without clarifying the fundamental differences between these paths or the limits of each.

The Ministry of Finance is adopting a downward path for the indebtedness of general budget agencies, under which it aims to reduce it from 84% of gross domestic product in (2024/2025) to 80% in (2025/2026), then to 76% in (2026/2027) and 72% in (2027/2028), reaching 70% in (2028/2029), before it falls to 68% by (2029/2030). According to the plan, achieving these targets is attributed to maintaining a high primary surplus, alongside achieving strong real growth rates, assumptions that bet on the sustainability of a favourable economic environment, despite the local and international fluctuations surrounding it.

On the external debt front, the government announces that it aims to reduce the debt balance of budget agencies by about $1 billion to $2 billion annually, while setting a ceiling for new international issuances so that they do not exceed the value of annual maturities, which means, in theory, limiting net new borrowing. However, this approach, as observers note, focuses on managing the debt more than actually reducing it, especially given the continued reliance on international debt markets to fill financing gaps.

In this context, during (2024- 2025) Egypt returned to the market for international issuances for the first time in three years, by offering Eurobonds and sukuk, amid what the government described as strong demand from investors, and a decline in the cost of financing compared with emerging-market averages. The government cites the fall in the risk index for investment in Egyptian securities to 271 points after it had reached 1858 points in December 2024, alongside a decline in the international bond yield curve of about 278 basis points, considering this evidence of improved market views, despite the continued fragility of social indicators and inflationary pressures domestically.

According to the plan, the Ministry of Finance seeks to raise the share of concessional external financing from new sources to 60% of total annual financing, in parallel with reducing reliance on high-cost commercial financing. In addition, it intends to direct no less than 50% of the proceeds of exiting government assets and any other exceptional revenues to reducing the debt, in a recurring bet on selling assets as a tool for easing pressures, not as a structural solution to the indebtedness crisis.

Domestically, the strategy aims to lengthen the average maturity of domestic debt from 3.5 years in (2024/2025) to between 4.5 and 5 years in the medium term, by expanding new financing tools such as local sukuk, retail bonds and floating-rate bonds, alongside buyback and swap operations. The government promotes these measures as a means of reducing refinancing risks, despite the continued concentration of domestic debt in the banking sector.

Despite the government’s announcement of a reduction in the debt-to-GDP ratio of about 12% over the past two years, and the subsequent upgrade of its credit rating by “Standard & Poor’s” last October, for the first time in seven years, the burden of debt service remains the most acute challenge. Official data indicate that debt service absorbs about 50% of total public expenditure, and about 72% of total revenues in 2024/2025, which are among the highest ratios among peer countries.

In conclusion, Egypt’s budget for the fiscal year (2026/2027) appears to be an attempt to balance the requirements of fiscal discipline with the pressures of social justice, as it combines promises to increase spending on health, education and subsidies with pledges to reduce the deficit and curb public debt. However, the success of this equation will not be measured by the size of the announced figures or official indicators, but by the government’s ability to actually implement, improve spending efficiency and direct resources to clear productive and service priorities whose results are reflected directly in citizens’ lives through price stability, improved services and rising real incomes, while the most important challenge remains narrowing the gap between the ambitions of economic policies and the burdens of the reality of living.

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