Egypt increases its financing needs by 25% for 2025-2026
The Egyptian government has increased its financing needs for the next fiscal year 2025-2026 by almost a quarter, bringing them to around 3.6 trillion Egyptian pounds (EGP). This sum will be used to cover the deficit in the general budget and to meet repayments and amortisations of current loans, as detailed in an analytical statement of the draft budget distributed to members of the House of Representatives and reviewed by media such as Asharq.
This significant increase is a response to the complex economic situation the country is going through, characterised by growing public debt, persistent inflation and a shortage of foreign currency. In this context, the government has implemented a series of fiscal adjustment measures aimed at containing the budget deficit and ensuring the liquidity necessary to meet its international obligations.
Fewer subsidies and more taxes
Among the strategies adopted is the progressive reduction of subsidies on essential products and services, a measure that has had a direct impact on citizens' pockets. Since July last year, the government has applied increases in the prices of train and metro tickets, telecommunications services, as well as readjustments in fuel prices, the latter having been increased for the second time in just six months.
These adjustments have been accompanied by an ambitious tax reform agenda, especially centred on the collection of value added tax (VAT). For the 2025-2026 fiscal year, a 34.4% increase in tax revenues on goods and services is expected, which would raise collections to approximately 1.103 trillion EGP.
This increase will be driven by a 50.2% rise in VAT revenue on domestic and imported goods, which is estimated to reach 640.4 billion EGP, that is, 214 billion more than budgeted for the current fiscal year.
Furthermore, in line with the recommendations of the International Monetary Fund (IMF), the Egyptian government is evaluating the elimination of up to 19 of the 58 tax exemptions currently applied to VAT. If this reform goes ahead, Egypt could generate additional revenue equivalent to 1% of Gross Domestic Product (GDP) in just 12 months, according to IMF calculations.
External financing
In parallel, Egypt is also turning to international markets to obtain liquidity. During the current fiscal year, which ends in June, the country faces an estimated financing deficit of 10 billion dollars, which it seeks to cover through the issuance of sukuk and sovereign bonds. Last January, it already managed to place 2 billion dollars in five- and eight-year international bonds.
Meanwhile, the House of Representatives approved the final accounts for the 2023-2024 budget, which included an additional allocation of 415 billion EGP compared to the original plan, reflecting higher public spending during the period.
With these measures, Egypt is trying to balance an economy under pressure from debt commitments, the rising cost of living and the demands of international organisations in the midst of a complex regional and global panorama.
However, the main challenge remains maintaining social and economic stability while implementing adjustments that could generate internal tensions, especially among the most vulnerable sectors.