Higher tax revenues help Egypt reduce fiscal deficit

Egypt has narrowed its budget deficit as higher tax revenues strengthened government finances, although heavy debt-interest payments remain a major challenge.

The deficit fell to 5.8 percent of GDP in the fiscal year ended June 2026, from 7.1 percent a year earlier, according to the finance ministry.

Tax revenues rose 27 percent, helped by government efforts to improve compliance and encourage businesses to settle their tax liabilities.

The improvement comes as Egypt seeks to strengthen its public finances under an economic reform programme backed by the International Monetary Fund.

Egypt’s budget recorded a surplus of about 4.9 percent before debt-interest payments in 2025-26.

“High debt service rates remain the biggest challenge in light of rising interest rates. As interest rates decline, the debt service bill will decrease significantly,” it said.

The ministry did not mention Egypt’s debt, but in a previous report it estimated external liabilities at more than $164 billion at the end of the first quarter of 2026, one of the highest levels in the Middle East and North Africa.

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The ministry said GDP expanded by about 5.1 percent in 2025-26, driven by higher private investment and strong growth in non-oil industries such as communications and information technology.

“There is a plan to intensify efforts with all partners in the government and private sector to encourage production- and export-led growth. We will continue to work to empower the private sector, which has demonstrated its capacity for growth by increasing its investments by nearly 65 percent during the past fiscal year,” it said.

In a February statement, the finance ministry said spending rose sharply in the first seven months of the 2025-26 fiscal year, driven by higher debt-interest payments.

Expenditure increased by EGP597 billion ($12 billion), or 29 percent, to EGP2.65 trillion between July 2025 and January 2026, the ministry said.

The ministry added that interest payments on the country’s debt rose 40 percent to nearly EGP1.48 trillion from EGP1.05 trillion.