In a move to tighten its finances under an ongoing International Monetary Fund (IMF) program, Egypt’s Cabinet approved a 4.6 trillion Egyptian pound ($91 billion) draft state budget for the 2025 financial year, set to commence in July. This decision comes as part of Egypt’s ongoing efforts to navigate economic challenges and fiscal reforms aimed at stabilizing its economy.
Egypt’s Financial Strategy: Revenue, Expenditure, and Deficit Projections
The draft budget reflects a substantial increase in both expenditure and revenue. Total government expenditure is projected to rise by 18% compared to the current 2024/25 budget, reaching 4.6 trillion pounds, while revenue is set to increase by 19%, with an estimated total of 3.1 trillion pounds. However, despite the rise in revenue, Egypt will face a projected fiscal deficit of approximately 1.5 trillion pounds ($30 billion). This deficit marks a significant challenge as Egypt continues its efforts to restore economic balance under the terms of its IMF-backed reform program.
The increase in expenditure is driven in part by high inflation rates, which have seen Egypt grappling with an annual inflation rate of 12.8% as of February 2025. Although inflation has moderated from its peak of 38% in September 2023, inflationary pressures continue to influence the budget planning, with measures in place to manage the economic impact.
Key Financial Reforms and IMF Support
The government’s decision to push forward with its financial reforms has been strongly influenced by the $8 billion financial reform program Egypt entered into with the IMF in March 2024. The program’s efforts to rein in inflation, cut costs, and improve fiscal management have begun to show signs of success. In a notable development earlier this month, the IMF approved the disbursement of $1.2 billion to Egypt after successfully completing its fourth review of the reform program.
The new draft budget also targets a primary surplus of 795 billion pounds, or approximately 4% of the country’s GDP, which is a step up from the 3.5% originally targeted for the current year. This improvement comes despite a slight reduction in the surplus, with Egypt’s fiscal surplus falling 0.5% short of the previously anticipated target in the fourth IMF review.
The IMF has praised Egypt’s fiscal discipline, especially its “strict control of spending,” which remains a key component of the country’s ongoing reform agenda.
Lower Public Debt and Social Support Spending
In addition to these fiscal improvements, Egypt’s debt-to-GDP ratio is projected to decrease from an expected 92% in the 2024/25 budget to 82.9% in the new budget, signaling progress in managing public debt. This reduction aligns with the broader fiscal goals of Egypt’s reform program, which focuses on achieving sustainable public finances.
Social support remains a top priority in the new budget. The Cabinet outlined that 732.6 billion pounds would be allocated toward subsidies, grants, and social benefits, marking an increase of 15.2%. Among the most notable allocations are a 20% increase in subsidies for essential commodities and bread, which will now total 160 billion pounds. Additionally, 75 billion pounds will be allocated to subsidize petroleum products, while another 75 billion pounds will go toward subsidizing electricity costs. A further 3.5 billion pounds will be used to support natural gas deliveries to households.
The Road Ahead: IMF and Egypt’s Financial Stability
The approval of the 2025 draft budget is a significant step in Egypt’s ongoing efforts to stabilize its economy and ensure continued IMF support. With inflation rates easing and fiscal reforms starting to take hold, Egypt is positioning itself for improved economic stability. However, the country must continue to navigate a complex economic landscape, balancing inflation control, fiscal discipline, and social support amid a challenging global financial environment.
As the new fiscal year approaches, all eyes will be on how effectively Egypt implements its budgetary plans and whether it can sustain its progress toward reducing public debt while fostering economic growth. With the IMF’s continued oversight and financial backing, Egypt’s fiscal future is cautiously optimistic, but challenges remain.
