When Minister of Finance Ahmed Kouchouk presented the draft budget for fiscal year 2026-2027 at a press conference on Saturday he was hopeful. He said that the government is targeting revenues of around LE4 trillion and expenditures of LE5.1 trillion.
It expects the overall deficit to narrow to 4.9 per cent of GDP from an estimated 6.1 per cent in the current fiscal year. And it is aiming to cut public debt to 78 per cent of GDP by 2027, compared to a target of around 83 per cent of GDP for the current year.
It aims to achieve a primary surplus of five per cent of GDP, up from nearly 3.5 per cent in the first nine months of the current fiscal year.
But Kouchouk said that the government was also aware of risks that could cause it to revise these figures. “We have increased both the size and the proportion of the reserves in the new budget to address current and potential risks, taking into account the exceptional regional challenges and the difficult economic repercussions associated with them,” he said.
The draft budget is being presented at a time of heightened geopolitical tensions, volatile energy markets, and disruptions to global trade. These pressures, economist Abdel-Fattah Al-Gibali argues in his article “The crisis budget and the crisis of the budget,” have created an environment in which traditional fiscal assumptions are increasingly fragile.
Al-Gibali wrote that external shocks are directly impacting Egypt’s public finances. As a result, this year’s budget lies in a fiscal framework that must contend with unprecedented uncertainty.
The draft budget was prepared before the escalation of the US-Israeli war on Iran. It prices in oil at $75 per barrel and an exchange rate of LE47 to the dollar. On Tuesday morning the dollar was trading at around LE53 and oil at around $100 per barrel.
Kouchouk projected a 27 per cent increase in tax revenues to support government revenues. He said the increase would not involve new taxes but instead would attract 100,000 new taxpayers through a simplified tax regime.
Al-Gibali recommended expanding the state’s fiscal space by diversifying sources of public revenue from economic authorities, public enterprises, and others. This would necessitate legislative amendments and a swift reconsideration of how surpluses are distributed across economic authorities, he added.
This could be achieved by requiring these entities to transfer the bulk of their accumulated surpluses to the treasury, which would then allocate them according to economic policy priorities, allowing society to generate higher public revenues.
According to economist Ahmed Elsayed, the government’s target of LE4 trillion in revenues hinges on both improved economic activity and more effective tax collection. “It is achievable, but optimistic, and it depends on a favourable environment and disciplined implementation,” he said.
Meanwhile, he said that expenditure could come under pressure if debt-servicing costs rise, if oil prices increase, or if the government is forced to expand social support beyond what is currently planned.
Elsayed expects revenues to come in slightly below target, in the range of LE3.8 to LE3.9 trillion, while expenditures could exceed targets if interest costs and energy pressures persist.
“The success of this budget will depend on the government’s ability to raise revenues without overburdening the real economy, contain unproductive spending, and protect vulnerable groups without slipping back into unsustainable fiscal expansion,” he said.
According to Elsayed, the oil price assumption of $75 per barrel is one of the most sensitive assumptions in the budget. Energy markets have become far more volatile, and any renewed geopolitical tension could quickly push prices above the planned level, he noted.
“Energy shocks do not only affect fuel subsidies, but they also feed into transportation costs, inflation, and eventually the broader cost structure of the economy,” Elsayed said.
He called for stronger hedging mechanisms and greater diversification of energy sources. It is also important to build strategic reserves that can cover longer periods, even if this comes at higher costs in the short term, he added.
There should also be greater emphasis on solar energy, which President Abdel-Fattah Al-Sisi has already urged the government to expand, he said. “This is no longer just an environmental priority, but a fiscal and strategic necessity,” he added.
Energy rationalisation policies should not remain temporary, crisis-driven reactions. They need to become a permanent part of the government’s policy framework, as well as of broader societal behaviour, Elsayed said.
The government has launched an awareness campaign encouraging people to save energy, and Kouchouk himself is appearing in an advertisement turning off lights in his ministry building and opening the blinds to let in sunlight.
The campaign is being carried out under the slogan “hand in hand, we will rationalise [energy].”
The draft budget also earmarks higher sums for citizen support. Social spending has been upped by 12 per cent, which will go towards items such as direct cash support to the most vulnerable, social housing, electricity and food subsidies.
Spending on education will increase by 20 per cent and on health by 30 per cent.
The increase in social spending is necessary under current conditions, especially given the continuing pressure on household purchasing power, Elsayed said. The higher allocations for subsidies, food support, cash-transfer programmes, healthcare, and wages reflect efforts to soften the social impact of necessary adjustments, he said.
However, he said that what matters more than more spending is “spending better, with a stronger focus on direct and well-targeted support, less leakage, and clearer measurements of impacts.” He also said the increases may fall short if inflation remains elevated.
While the draft budget factors in inflation expectations of around nine per cent, the March urban headline consumer price index (CPI) inflation in fact came to around 15 per cent, compared to 13 per cent the month before, the highest reading since May 2025.
The draft budget aims for GDP growth of 5.4 per cent. This contrasts with forecasts by S&P Global Ratings, which revised down their full-year growth forecast to 4.7 per cent for the current fiscal year from 4.8 per cent and an estimated GDP growth of 4.3 per cent in fiscal year 2026-2027 instead of 4.7 per cent because “war-related shipping disruptions are expected to pressure trade, logistics, and import prices, while consumption and investment are likely to soften amid heightened uncertainty and rising inflation.”
However, it also affirmed its B/B long and short-term foreign and local currency sovereign credit rating for Egypt.
According to S&P, the ongoing conflict in the Middle East is placing renewed strain on Egypt’s external position, which remains vulnerable to shocks in global energy and food markets. However, the country has stronger external buffers than during past crises, including higher international reserves, a more flexible exchange rate, and continued access to multilateral support, it said.
The European Bank for Reconstruction and Development (EBRD) last week launched a conflict-response programme targeting up to five billion euros in investments in 2026 to support economies directly affected by the conflict in the Middle East and countries facing spillover impacts such as Egypt.
The International Monetary Fund (IMF) also expects to provide up to $50 billion in immediate financial assistance to countries affected by the Middle East war, Kristalina Georgieva, IMF managing director, said.
Egypt’s Extended Fund Facility (EFF) with the IMF is expected to run until December. The IMF completed Egypt’s fifth and sixth reviews in late February 2026 and released about $2.3 billion.
Elsayed said that if Egypt faces a prolonged external shock, whether from energy markets, capital flows, or weaker foreign currency inflows, then the possibility of negotiating additional IMF support after the current programme ends would remain on the table.
However, he stressed that additional borrowing must be linked to credible reforms that improve productivity, exports, and private-sector space in the economy.
Al-Gibali called for a budget that reflects actual economic conditions. A one per cent decline in global trade negatively affects Suez Canal revenues accruing to the state treasury by about two per cent, he said.
Similarly, a one per cent change in domestic interest rates has an impact of approximately LE80 to LE100 billion on the budget, he added.
Time constraints should not be used as a justification for changes, nor should reliance be placed on post-first-quarter reviews and adjustments based on implementation outcomes, he wrote.
According to the constitution, the draft budget should have been presented to parliament before the end of March. Al-Gibali noted that although the constitution does not explicitly address disagreements over the budget, the budget law stipulates that if a new budget is not approved before the start of the fiscal year, the previous budget will remain in effect until the new one is adopted.
* A version of this article appears in print in the 16 April, 2026 edition of Al-Ahram Weekly.
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