Egypt Daily News – On Wednesday, the Egyptian government approved the draft budget for the new fiscal year 2025/2026, marking the largest budget in its history, with targeted revenues of 3.1 trillion Egyptian pounds (61.3 billion dollars), reflecting an annual growth rate of 19%. It also aims to reduce the debt of the general budget to 82.9%, the lowest level in the last four years.
Experts believe that the draft budget strikes a balance between achieving social protection through an increase in allocations for subsidies and social benefits to 732.6 billion pounds (14.5 billion dollars), with an annual increase exceeding 15%. At the same time, it continues to implement reform measures, including reducing the subsidy bill for petroleum products by half to 75 billion pounds (1.5 billion dollars).
The new fiscal year’s budget targets a primary surplus of 795 billion Egyptian pounds (15.7 billion dollars), which represents 4% of GDP. It also aims to increase spending to 4.6 trillion pounds (91 billion dollars), with an annual growth rate of 18%. The budget meets the constitutional entitlement for spending on education, health, and scientific research. Additionally, it raises allocations for public sector wages to 679.1 billion pounds (13.4 billion dollars), with an annual growth rate of 18.1%, according to an official statement.
For the poor, the new fiscal year’s budget allocates 732.6 billion pounds (14.5 billion dollars) for subsidies, grants, and social benefits, reflecting an annual growth rate of 15.2%. This amount is distributed as follows: 160 billion pounds (3.2 billion dollars) for subsidizing food commodities and bread, with an annual growth rate of 20%; 54 billion pounds (1.1 billion dollars) for social security pensions (“Takaful and Karama”); 75 billion pounds (1.5 billion dollars) for subsidies on electricity and petroleum products; and 3.5 billion pounds (69.2 million dollars) for supporting the delivery of natural gas to homes.
Fakhry El-Feky, Chairman of the Planning and Budget Committee in the House of Representatives, stated that the budget aims to improve the standard of living of citizens and achieve social protection by increasing allocations for subsidies, grants, and social benefits from 636 billion pounds (12.6 billion dollars) to 732.6 billion pounds (14.5 billion dollars), with an annual increase exceeding 15%. This includes an increase in bread subsidy of 26 billion pounds (514.2 million dollars), with an annual growth rate of 20%.
He also noted that subsidies for petroleum products will be halved, from 154 billion pounds (3.1 billion dollars) to 70 billion pounds (1.5 billion dollars), meaning continued support for petroleum products, especially diesel and gas cylinders, while gasoline prices will be adjusted to achieve balanced support. In addition, electricity subsidies will continue, ensuring that prices do not rise significantly in the upcoming period.
Al-Feky added that the budget aims to improve income levels by increasing allocations for public sector wages, which include 4.6 million employees. These wages will rise from 575 billion Egyptian pounds (11.4 billion dollars) in the current fiscal year’s budget to 679.1 billion pounds (13.4 billion dollars) in the next fiscal year, reflecting an annual growth rate of 18.1%.
This is a high rate compared to the expected inflation rate for the upcoming year, which will reach 14%. The budget also increases the social security pension “Takaful and Karama” by 14 billion pounds (276.9 million dollars), with an annual growth rate of 35%.
He mentioned that the budget aims to stimulate various economic sectors to achieve high growth rates and provide job opportunities, with 8.3 billion pounds (164.2 million dollars) allocated to support the tourism sector and 5 billion pounds (98.9 million dollars) for priority industrial activities. The budget also meets the constitutional spending requirements for education, health, and scientific research, reaching 10.7% of GDP, the same percentage applied in the current fiscal year’s budget.
Economic and financial expert Medhat Nafi stated that the government aims to reduce the general budget’s debt to 82.9% in the new fiscal year’s budget, relying on setting a cap on government debt through reducing public investments, which fell by 25% during the second quarter of the current fiscal year. In contrast, private sector investments increased to exceed 50% of total investments for the first time in years. He pointed out that the Central Bank of Egypt’s expectations for an upcoming monetary easing cycle, with a rapid reduction in interest rates, would directly affect the reduction of debt ratios.
Egypt recorded a growth rate of 4.3% during the second quarter of the current fiscal year 2024/2025, compared to 2.3% in the same quarter of the previous fiscal year. The improvement in economic activity was driven by sectors such as manufacturing, transportation, storage, and restaurants and hotels. Public investments fell by 25.7%, while private investments grew by 35.4% during the same quarter, representing approximately 53.3% of total investments, according to an official statement.
Nafi stated that it was necessary to increase allocations for subsidies on petroleum products and electricity in the new fiscal year’s budget to address the gap between local electricity production and consumption, especially during the summer months when consumption peaks due to high temperatures. This is particularly important given that extraction activity declined during the second quarter of the current fiscal year, and there was a slowdown in new explorations, which negatively affects the availability of petroleum products required for electricity production during the upcoming summer season.
According to a report from the Ministry of Planning, extraction activity declined during the second quarter of the current fiscal year, but the impact of investments in new discoveries and the development of production fields is expected to appear in the near future, which will help support future production capacity and alleviate the decline in the sector.
Nafi further stated that despite the global drop in oil prices, which reduces the import bill, the general budget should account for the provision of allocations for importing the gas needed for electricity production while simultaneously providing support for low-income groups. In this regard, the budget includes other provisions to support the most needy groups, such as subsidies for food commodities, pensions, and raising the minimum wage.
The Egyptian budget allocated 75 billion pounds (1.5 billion dollars) for petroleum product subsidies, the lowest level in two years. The cost of petroleum product subsidies surged from 18.7 billion pounds (369.8 million dollars) in 2019/2020 to 119.4 billion pounds (2.4 billion dollars) in 2023/2024, and then to 154.5 billion pounds (3.1 billion dollars) in the current fiscal year.
