Ahmed Kamel – Egypt Daily News
Egypt closed the 2025–26 fiscal year with a narrower budget deficit and faster economic growth, according to figures released by the Finance Ministry. The overall deficit fell to 5.8% of gross domestic product, down from about 7.2% a year earlier, while the economy expanded by 5.1%, compared with roughly 4.4% in 2024–25.
The results offer the government evidence of progress on two connected priorities: improving public finances and encouraging economic activity. But the headline deficit does not tell the whole story. Interest payments remain a major claim on state revenue, and the government’s next challenge is to sustain growth while continuing to reduce its borrowing needs.
Finance Minister Ahmed Kouchouk said the primary surplus the balance between government revenue and spending before interest payments is estimated at 4.9% of GDP for the year. A primary surplus shows that revenue exceeded non-interest spending. It does not mean the government had an overall surplus: once the cost of servicing accumulated debt is included, the budget remained in deficit.
That distinction is central to Egypt’s fiscal position. A stronger primary surplus can help slow the accumulation of debt, but it does not immediately remove the pressure created by high interest costs. The government has said it wants to improve the structure of its debt, extend repayment periods and diversify funding sources to reduce refinancing risks. The scale of the challenge will depend not only on budget targets, but also on borrowing costs and the government’s ability to manage maturing obligations.
The reported 5.8% deficit is lower than the 7.2% recorded in the previous fiscal year. It also falls below the 7.3% deficit target set for 2025–26, while the 4.9% primary surplus exceeded the original 4% target. The government’s final figures therefore indicate a stronger fiscal outcome than it had initially budgeted for.
Those figures should be distinguished from earlier estimates published before the fiscal year had fully ended. Forecasts and partial-year calculations can differ from the final accounts because they cover different periods or use different assumptions. The ministry’s announced result refers to the completed 2025–26 fiscal year, which ended in June.
Economic growth accelerated alongside the fiscal improvement. Government data point to stronger activity in manufacturing, communications and information technology sectors that can contribute to output beyond the traditional sources of growth. The expansion is also important to the budget: a larger economy can broaden the base from which the state collects revenue, although stronger GDP alone does not guarantee that households will feel an immediate improvement in living standards.
For the current fiscal year, 2026–27, the government is targeting growth of about 5.4%. Its budget plans for a primary surplus equal to 5% of GDP and an overall deficit of 4.9% by June 2027. It also aims to reduce public debt to about 78% of GDP.
Meeting those goals will require the government to carry forward last year’s fiscal gains while managing competing demands on spending. Higher allocations for public services and social support must be balanced against the aim of limiting borrowing. At the same time, faster growth depends on continued investment and on a stronger role for the private sector—an objective the government has repeatedly identified as part of its wider economic strategy.
The targets are ambitious, and they are not guaranteed by the latest results. Debt-service costs remain a significant constraint, while changes in interest rates, energy prices and external conditions can alter the budget outlook. If financing costs stay elevated, a large primary surplus may still translate into only gradual improvement in the overall deficit.
The government’s latest figures nevertheless show a more favorable combination than in the previous year: a smaller deficit, a larger primary surplus and faster growth. The key test now is whether Egypt can sustain that combination through 2026–27 and convert improved fiscal indicators into durable investment, stronger productive sectors and economic gains that reach beyond the government’s balance sheet.
