Egypt’s primary fiscal surplus—excluding proceeds from state asset sales—is expected to reach 4% of gross domestic product (GDP) in fiscal year (FY) 2025/2026, according to the International Monetary Fund’s (IMF) latest assessment. While the figure represents a slight downward revision from earlier program commitments, it signals continued progress in Egypt’s fiscal consolidation agenda.
The updated projection is 0.5 percentage points lower than previously agreed targets under Egypt’s extended fund facility. However, the IMF remains optimistic about the country’s fiscal outlook, forecasting the primary surplus to expand further to 5% of GDP in FY2026/2027.
Gradual Debt Reduction Ahead
In its report, the IMF noted that Egypt’s debt-to-GDP ratio is on a downward trajectory, a trend supported by sustained primary surpluses, a favorable interest-growth differential, and a strategic commitment to using half of all divestment inflows to reduce public debt.
This approach reflects the Egyptian government’s broader fiscal strategy, which includes rationalizing expenditures, broadening the tax base, and reducing reliance on one-off revenues such as privatization proceeds. The debt outlook marks a critical milestone for the country, which has faced mounting fiscal pressures in recent years due to external shocks, currency volatility, and subsidy burdens.
Mixed Results in First Half of FY2024/2025
The IMF report also shed light on the less-than-expected progress toward fiscal consolidation during the first half of FY2024/2025. Despite robust growth in tax revenue collections, fiscal performance fell short of original program benchmarks, signaling persistent challenges in expenditure management.
“The progress toward fiscal consolidation in the first half of FY2024/2025 was less strong than initially projected under the program despite strong growth in tax revenue collections,” the IMF noted.
In response, Egyptian authorities are reportedly moving to tighten spending in the second half of the fiscal year to ensure the end-year fiscal target is achieved. This includes reviewing public sector wage growth, prioritizing critical social spending, and strengthening oversight on capital expenditures.
Balancing Reform and Stability
Egypt’s fiscal reforms are being implemented under a broader IMF-supported economic reform program designed to stabilize the macroeconomic environment, enhance investor confidence, and protect vulnerable populations. A central pillar of the reform package is the reduction of public debt and the creation of fiscal space for social and development spending.
The government has also advanced a divestment strategy, attracting private capital through the sale of stakes in state-owned enterprises and strategic assets. While these inflows bolster foreign exchange reserves and liquidity, the IMF has stressed the importance of allocating a substantial portion of these revenues toward debt reduction, rather than recurrent expenditures.
Regaining Momentum on Fiscal Path
Egypt poised to achieve a 4% primary surplus next fiscal year and aiming for 5% the year after. Continued discipline and reform implementation will be essential to cementing these gains and ensuring long-term debt sustainability.
The IMF’s analysis underscores both the progress and the pressure points in Egypt’s fiscal story—highlighting the delicate balance between reform ambitions and socio-economic realities.
