Egypt’s cabinet greenlighted a record EGP 6.4 trillion ($135.45bn) budget for fiscal year (FY) 2024/25, prioritizing deficit reduction and increased social spending.
This marks the first time the government has presented a consolidated budget encompassing the entire general government, including both the administrative apparatus and economic entities. This shift aims to offer a clearer picture of the state’s fiscal health.
The budget targets a primary surplus exceeding 3.5% of GDP, aiming to bring the overall deficit down to 6% in the medium term. Additionally, it seeks to place the debt-to-GDP ratio on a downward trajectory, aiming for 80% by June 2027.
Fiscal Consolidation Measures
To achieve these ambitious goals, the government will implement several measures including:
- Debt Ceiling: A legal limit will be established on the general government debt, requiring presidential and cabinet approval for any increase.
- Debt Reduction via Privatization: Half of the proceeds from the government’s privatization program will be directly channelled into debt reduction.
- Prioritizing Private Investment: A cap of EGP 1 trillion will be set on total public investment, creating space for increased private sector participation.
Regarding social protection measures, the budget allocates significant resources to social programs, including allocations for the health and education sectors will rise by over 30%.
It also includes increased social spending on subsidies, grants, and social benefits will jump to EGP 636bn.
On the other hand, the government aims for a 60% surge in non-tax revenue and a 30% increase in tax revenue without introducing new burdens on citizens or investors.
This will be achieved by broadening the tax base to capture a wider portion of the economy, and increased use of electronic tax systems aims to integrate the informal economy into the formal sector, boosting tax collection.
The FY 2024/25 budget represents a crucial step towards fiscal consolidation for Egypt. The government’s commitment to deficit reduction, debt management, and social welfare spending lays a foundation for long-term economic sustainability.
The focus on expanding the tax base and leveraging digital systems to improve tax collection is a positive development.
Overall, this ambitious budget offers a credible plan to enhance Egypt’s fiscal position. The government’s successful implementation will be key to achieving its stated goals.
