Egypt Charts Ambitious Fiscal Course: Targets 78% Debt-to-GDP by 2027 Amidst Regional Turbulence and Economic Resilience
Egypt’s newly approved state budget signals a determined fiscal consolidation strategy, aiming to reduce the debt-to-GDP ratio to approximately 78% by June 2027 and achieve a $1bn to $2bn reduction in external debt. Prime Minister Mostafa Madbouly unveiled these targets, underscoring the nation’s economic performance, which registered a robust 5% growth rate in the third quarter, even as regional conflicts cast a shadow.
Speaking at a press conference following a cabinet meeting, Madbouly articulated the government’s economic objectives, investment blueprints, and diplomatic engagements. The budget prioritises structural economic adjustments, with a goal to lower the financing needs of budget agencies to 10% of GDP and cap debt servicing expenditures at 35% of total outlays in the medium term. Significant allocations are earmarked for public services, including EGP 837bn for social safety net programmes and EGP 822bn for public sector salaries.
Further bolstering key sectors, funding for health and education has been increased by 30% and 20% respectively. An EGP 80bn allocation is designated to stimulate industrial growth, local manufacturing, entrepreneurship, and export promotion. Despite economic headwinds stemming from the US-Iran conflict in the latter half of the fiscal year, Egypt’s economy demonstrated resilience, expanding by 5% in the third quarter, an improvement from 4.8% in the same period last year. Madbouly highlighted the petroleum sector’s return to positive growth, attributed to the settlement of arrears with foreign partners and the recommencement of exploration and production activities. To enhance the business environment, parliament has approved six draft laws amending tax regulations, designed to streamline processes for investors.
The government is actively fostering private sector participation, with the second iteration of the State Ownership Policy Document introduced to solicit expert feedback. This policy aims to elevate the private sector’s share of total state investments to 65% by 2030, a significant increase from the current 56.5%, which itself represents a substantial rise from less than 40% in recent years. This strategic pivot is exemplified by a new $3.1bn integrated urban project in East Cairo, a joint venture between Egyptian and Emirati private real estate firms.
In the renewable energy domain, Norwegian company Scatec is poised to invest over $5bn in Egypt. Recent developments include the inauguration of the first phase of the “Obelisk” project, which will generate 1,100 megawatts (MW) of solar energy complemented by 200 MW of battery storage. Furthermore, a planned 5-gigawatt battery storage manufacturing plant is slated to commence production in June 2027, a move intended to localise the industry and ensure uninterrupted power supply.
On the diplomatic front, Madbouly reported Egypt’s role, alongside Saudi Arabia, Pakistan, and Turkey, in mediating a memorandum of understanding between the United States and Iran to de-escalate their conflict. President Abdel Fattah al-Sisi convened with the foreign ministers of this quartet to coordinate future actions, reiterating Egypt’s stance against military conflict, the imperative to secure Gulf and Lebanese borders, and its support for a Palestinian state based on 1967 borders with East Jerusalem as its capital. The ongoing regional instability has impacted Egypt’s tourism sector since May. While the first quarter saw a 16% year-on-year growth, following a record 19 million visitors last year, the government anticipates a downturn in tourist arrivals in the second and third quarters due to the conflict. In response, the cabinet has agreed to expedite a package of incentives for tourism investors.
Domestically, the Fustat Hills Park project in historic Cairo is nearing completion, with remaining commercial and hotel facilities expected by September 30. A partial opening of the park is anticipated in the coming months. Madbouly concluded his briefing by acknowledging the upcoming 13th anniversary of the June 30 revolution and congratulating the Egyptian national football team on their inaugural World Cup victory.
