Egypt Approves Budget for FY2025-26 Amidst IMF Pressure

Egypt FY2025-26 budget, totaling EGP 4.6 trillion (US$90.97 billion), focuses on fiscal discipline, social protection, and economic growth, aligning with IMF-backed reforms. Key measures include increased subsidies, higher public sector wages, and targeted investments in productivity and infrastructure.

By Sudhanshu Singh

The Egyptian government has approved a budget totaling EGP 4.6 trillion (US$90.97 billion) for fiscal year 2025-26, representing an 18 percent increase compared to the previous fiscal year. The budget underscores a continued commitment to fiscal discipline, social protection measures, and targeted economic investments, aligned with ongoing economic reforms agreed upon with the International Monetary Fund (IMF).

This analysis explores important components of the budget, examines their implications, and assesses the broader economic context influencing these fiscal decisions.

Egypt budget FY2025-26: Fiscal discipline and growth-focused expenditure

Egypt targets revenues of about EGP 3.1 trillion (US$61.3 billion), up 19 percent from FY2024-25, with a projected deficit of EGP 1.5 trillion (US$29.66 billion). The government has set a primary surplus goal of EGP 795 billion (US$15.72 billion), equivalent to 4 percent of GDP, an improvement over the previous year’s 3.5 percent target. This aligns closely with IMF benchmarks and indicates a move towards fiscal sustainability. Public debt is forecast to decline notably to 82.9 percent of GDP from the current year’s anticipated 92 percent, underscoring a committed approach to debt management.

Economic indicators reflect increasing momentum, with GDP growth reaching 4.3 percent in the second quarter of FY2024-25, driven primarily by manufacturing, transportation, storage, and tourism sectors. In addition to this, private investment surged by 35.4 percent, reflecting the government’s strategy to boost private sector participation. Foreign Direct Investment (FDI) has demonstrated resilience in the face of Red Sea crisis and looming tariff threats, increasing by 17 percent year-over-year to US$2.7 billion.

Enhanced social protection and subsidies

Social support remains central to Egypt’s fiscal strategy, with significant increases in subsidies, social grants, and benefits. Approximately EGP 732.6 billion (US$14.49 billion),15.2 percent higher than the previous year, is allocated toward these critical social expenditures.

Other major subsidy allocations include:

• Food subsidies increased by 20 percent, totaling EGP 160 billion (US$3.16 billion);
• Petroleum and electricity subsidies each receive EGP 75 billion (US$1.48 billion);
• Household natural gas subsidies received an allocation of EGP 3.5 billion (US$69.22 million); and
• Expanded support for “Takaful” and “Karama” programs, totaling EGP 54 billion (US$1.07 billion), reflects a 35 percent increase with higher monthly payments effective April 2025.

Strategic healthcare allocations

The government’s prioritization of healthcare is reflected in increased funding aimed at improving accessibility and infrastructure. Significant allocations include EGP 22 billion (US$435 million) for medicines and EGP 15.1 billion (US$298.6 million) for treating uninsured citizens. Health insurance expansion has received a focused boost with EGP 5.9 billion (US$116.68 million) dedicated to coverage enhancements, particularly benefiting students, caregivers, and vulnerable groups.

Improved public sector wages

In response to inflationary pressures, public sector wages will see considerable increases beginning July 2025. The budget allocates EGP 679.1 billion (US$13.43 billion), an 18.1 percent increase from the prior year to fund wage enhancements. The minimum wage will rise to EGP 7,000 (US$138.43) monthly, alongside annual salary increases of 10 percent for civil servants and 15 percent for employees outside civil service regulations. Budget also has components of increased cost-of-living allowances and incentives across various job grades, reinforcing public sector retention and morale.

Promoting economic productivity and export growth

The budget significantly elevates allocations to sectors aimed at stimulating productivity and export capabilities, with funding tripling to EGP 78.1 billion (US$1.54 billion):

The FY2025-26 budget also ensures support for crucial infrastructure and pension schemes. Public transportation initiatives, including enhancements to national railways and urban transit systems in Cairo and Alexandria, receive dedicated funding. Pension support remains strong, with EGP 227.1 billion (US$4.49 billion) allocated to ensure long-term financial stability for retirees.

IMF backing and macroeconomic stability

Egypt’s current fiscal approach aligns with commitments under its ongoing US$8 billion IMF-supported economic reform program, initiated in March 2024. The IMF approved a fourth tranche disbursement of US$1.2 billion on March 11, 2025, following Egypt’s achievement of revised fiscal targets. The IMF has also granted a waiver permitting a recalibration of Egypt’s medium-term fiscal goals, adjusting the primary surplus target slightly lower due to economic pressures.

The IMF has acknowledged Egypt’s tight spending control measures, instrumental in reducing inflation significantly to 12.8 percent from a peak of 38 percent in September 2023. Moreover, Egypt recently secured additional financing of US$1.3 billion from the IMF’s Resilience and Sustainability Facility, intended to bolster economic resilience amid external shocks, particularly following revenue impacts from regional tensions affecting the Suez Canal and natural gas production challenges.

Key takeaways from Egypt budget FY2025-26

Egypt’s FY2025-26 budget underscores a balanced economic strategy, effectively combining fiscal prudence with significant investments in social protection and productive economic activities. Through disciplined fiscal management and strategic investments, Egypt is well-positioned to address ongoing economic challenges while fostering sustainable growth, economic stability, and enhanced social equity.

(US$1 = EGP 50.57)

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