(CNN) - The total Egyptian budget deficit declined to 5.8% of GDP during the fiscal year 2025/2026, coinciding with an increase in the proportion of tax revenues to 13% of GDP, and achieving a primary surplus of 4.9%, according to what was announced by the Ministry of Finance, which aims to reduce the debt of budget agencies to 78% of GDP by June 2027.
The ministry said, after Standard & Poor's installed Egypt's credit rating at B/B with a stable outlook, that it continues to work on achieving a balance between stimulating economic activity, encouraging investment, financial discipline, and reducing debt.
She explained that the growth of the economy during the current fiscal year targeted 5.1%, led by the manufacturing, communications and tourism sectors, with a target for the private sector’s contribution to reach 65% of the total investments.
Economist Walid Jaballah said that the decline in the overall budget deficit came as a result of measures to control public finances, aimed at enhancing revenues and reducing expenditures, while avoiding imposing new taxes.
Jaballah explained, in exclusive statements to CNN Arabic, that the tax facilitations that were implemented during the past year contributed to increasing public revenues, in addition to setting a ceiling on government investments, which helped reduce government spending. The Public Finance Department was also keen to preserve the primary surplus and not deplete it by increasing support for petroleum products or expanding spending. Measures to control revenues and expenditures also contributed to reducing the deficit, according to the economist.
Regarding the significance of achieving a primary surplus of 4.9% of GDP, Djaballah said that continuing to achieve primary surpluses over successive years represents the basic guarantee for putting public debt on a downward path and reducing its ratio to GDP, adding that reducing debt as a percentage of GDP would increase the financial space available to the government to direct greater resources to social spending.
Regarding the measures required to enhance revenues, Jaballah said that completing the second phase of tax facilitation, in addition to the efforts of the Ministry of Finance in inventorying and registering real estate for real estate tax purposes, could contribute to increasing public revenues, in addition to that improving public finance indicators does not necessarily require putting forward new ideas as much as it requires raising the efficiency of administration and improving the implementation of procedures, ensuring the continued results of controlling revenues and spending.
For his part, economic expert Mustafa Badra said that increasing the state’s public revenues and rationalizing spending are among the basic factors that contribute to reducing the budget deficit, noting that enhancing public resources without increasing tax brackets supports the improvement of public finance indicators.
Badra added that the high cost of importing petroleum products in light of the rise in global prices represents a challenge to managing the fuel subsidy file, explaining that increasing subsidies raises financial burdens, while reducing them leads to a reduction in spending in this regard, at a time when the country is facing a rise in the cost of importing petroleum products.
He believed that achieving a primary surplus reflects, from his point of view, a relative improvement in public financial management, pointing out that this indicator is related to debt management and the cost of servicing it, and that a change in the burdens of borrowing or debt service may affect the level of the primary surplus.
Badra stressed, in exclusive statements to CNN Arabic, that reducing the budget deficit requires increasing public resources and rationalizing spending, while enhancing the efficiency of debt management, noting that integrating the parallel economy into the formal economy represents one of the paths that can contribute to expanding the economic base and increasing state revenues.
The economist estimated the size of the parallel economy at about 4 trillion pounds or more, considering that integrating part of it into the formal economy could help reduce the budget deficit, by expanding the scope of activities subject to the official system and increasing the public toll.
Badra stressed the importance of developing plans to address a number of issues that he believes affect the state’s resources, including regulating the conditions of real estate developers and real estate financing, legalizing encroachments on land, and reducing evasion of payment of dues for electricity, gas, and water services.
He stressed the need for the relevant ministries to develop clear visions for dealing with these files, in a way that contributes to strengthening the state’s resources and improving the efficiency of collection, without relying exclusively on increasing the tax burdens on citizens.
According to the Ministry of Finance, the government aims to reduce external debt by about one to two billion dollars annually, in addition to enhancing foreign direct investment, diversifying sources of growth, and increasing exports, while improving the targeting of social protection programs to eligible groups, as well as managing financial policy flexibly, continuing reforms, and directing exceptional revenues to reduce debt, which represent major axes in its plan to enhance financial discipline and support economic activity.
