The Egyptian Ministry of Finance announced an ambitious financial strategy aimed at strengthening fiscal discipline and restoring stability to macroeconomic indicators. The ministry stressed its commitment to targeting a reduction in the budget deficit to 4.9% of GDP during the 2026/2027 fiscal year, while maintaining this target percentage in the medium term.
Primary Surpluses and Financial Sustainability Strategy
Within the framework of the State Budget Preparation Guide for the fiscal year 2026/2027 and the medium-term budget framework, the Ministry affirmed its commitment to maintaining annual primary surpluses until the fiscal year 2029/2030. The primary surplus is a vital indicator of the state's ability to cover its operating expenses excluding debt interest, thus directly contributing to reducing public debt levels and achieving financial and economic stability, which in turn ensures the financial security of current and future generations.
Downward trajectory of public debt
Official data revealed that the government has adopted a strict downward trajectory for the public debt-to-GDP ratio. The plan aims to reduce debt to approximately 75.5% of GDP in the 2026/2027 fiscal year budget, with the ambition of reaching around 68% by the end of the 2029/2030 fiscal year. This approach is part of the state's efforts to improve its credit rating and mitigate financial risks.
Debt restructuring
A key pillar of the new financial plan is extending the maturity of the budget's debt. The ministry aims to increase the average debt maturity to 4.5–5 years in the medium term, compared to the current 3.5 years. This strategic move aims to alleviate the pressure on the need for rapid financing and reduce refinancing risks.
To achieve this, the government plans to reduce its reliance on treasury bill issuances (short-term instruments) and replace them with a diversified issuance of medium- and long-term government bonds. It also seeks to target new and innovative debt instruments to broaden the investor base and attract additional liquidity to the government securities market, which will positively impact debt servicing costs.
The impact of the reduction on the economy and inflation
During the coming fiscal years, the Egyptian government aims to continue its policy of reducing the debt of the budgetary bodies. This gradual reduction is expected to lead to a tangible improvement in the sustainability of public finances and increase the resilience of the Egyptian economy in the face of external shocks and challenges that the global and local economy may face in the future.
Furthermore, lower debt levels will enhance the competitiveness of the Egyptian economy by creating a favorable economic environment that helps curb inflation and reduce interest rates. This stable climate will support increased private sector investment, as it reduces government competition for credit, paving the way for the creation of real and sustainable jobs and driving comprehensive development.
