Egypt Trims Budget Deficit as Growth Hits 5.1%

Egypt’s budget deficit keeps narrowing and its debt is falling, the World Bank said in an outlook released on Tuesday 6 October. For US holders of Egyptian dollar bonds, it shows a major US ally weathering the Middle East war that began in February.

The Washington-based lender, whose largest shareholder is the United States, estimates Egypt’s economy grew 5.1% in the fiscal year to June 2026. The Cairo daily Youm7 reported in Arabic that this beats the 4.3% the bank had forecast in April.

The figures come from the bank’s Macro Poverty Outlook for Egypt , a two-page country note dated October 2026. It appeared with the bank’s regional update for the Middle East, North Africa, Afghanistan and Pakistan.

On the bank’s estimate, the central government budget deficit fell to 5.3% of gross domestic product (GDP) between July 2025 and May 2026. A year earlier it stood at 6.5%.

Revenue did most of the work, rising from 12.4% to 13.8% of GDP. The bank credits better value-added tax and income tax collection after reforms trimmed exemptions.

A one-off asset deal at Alam Al Roum, on Egypt’s Mediterranean coast, added 0.8% of GDP in non-tax revenue. Growth was driven by household spending, investment, non-oil manufacturing, tourism and information technology.

The war hit Egypt early, as oil prices jumped and pipeline gas supplies were disrupted. Investors pulled US$9.2 billion out in March, and the Egyptian pound lost about 17%.

The authorities let the exchange rate adjust, raised fuel and electricity prices and paid extra cash to poor families. Investor confidence then returned, and stock market value recovered to pre-war levels.

By June 2026, net foreign assets, the banking system’s foreign holdings minus its foreign debts, reached US$28 billion. The bank calls that the second-highest level in over a decade.

Official reserves and other foreign currency assets reached US$67.4 billion, enough to pay for 7.6 months of goods imports.

The Central Bank of Egypt has kept its overnight deposit and lending rates at 19% and 20% since February 2026. That followed cuts totalling 8.25 percentage points from April 2025, the World Bank notes.

The central bank held rates again on Thursday 24 September, the Egyptian banking news site Bnok24 reported in Arabic. Its next scheduled meeting is on Thursday 29 October.

For the full year to June 2026, the bank estimates the overall budget deficit at 6.8% of GDP, down from 7.1%. It forecasts 6.5% in the year to June 2027 and 5.7% a year later.

Government debt is estimated to have fallen from 82.5% of GDP in June 2025 to 79.2% a year later. The bank expects 76.3% next June and 74.5% in June 2028.

Egypt should also keep a primary surplus, meaning revenue exceeds spending before interest costs, of 3.6% to 3.9% of GDP. The bank expects full-year revenue to climb from an estimated 15.5% of GDP in 2025/26 to 16.7% in 2027/28.

Finance Minister Ahmed Kouchouk presented the 2025/26 budget to parliament in April 2025, the state-owned daily Al-Ahram reported. He targeted a budget deficit of 7.3%, a 4% primary surplus and debt of 80% by June 2026.

On the World Bank’s estimates, Egypt beat its deficit and debt goals. It came in just short on the primary surplus.

Egypt matters to Washington well beyond its budget. Since 1978, the State Department says, the United States has given Egypt over US$50 billion in military aid and US$30 billion in economic aid.

For holders of Egypt’s dollar bonds, a shrinking budget deficit and falling debt ratios are good news. The bank notes that risk spreads, the extra yield investors demand to hold Egyptian debt, have eased.

The pressure point is cash, with external financing needs of about US$28 billion from July to December 2026. Investors are also weighing Cairo’s next step with the International Monetary Fund .

On shipping, Suez Canal activity grew year on year for the first time since 2023/24, the bank says. But canal receipts remain below their October 2023 level.

The bank’s figures are estimates and forecasts, and its outlook depends on the regional war. It names an escalation of the conflict and volatile portfolio flows as the main risks.

Inflation averaged 13.3% in the year to June 2026 and is forecast at 14.2% in the year to June 2027, which could squeeze households. When Suez Canal receipts will recover is also unclear; the bank says that hinges on regional security.

It estimates the central government deficit fell to 5.3% of GDP from July 2025 to May 2026, from 6.5% a year earlier. It sees the full-year budget deficit falling to 5.7% by 2027/28.

The World Bank estimates growth of 5.1% in the fiscal year to June 2026. It expects 4.3% in the year to June 2027 and 5.0% a year later.

Egypt is a major US aid recipient, runs the Suez Canal and sells dollar bonds to foreign investors. Its finances shape stability in a region where Washington has large security interests.

The bank points to a wider regional war, volatile portfolio flows and about US$28 billion in external financing needs to December. Inflation is also forecast to rise to 14.2% in the year to June 2027.

Sources: World Bank, Macro Poverty Outlook: Arab Republic of Egypt (October 2026) , 6 October 2026; World Bank, press release on its Middle East and North Africa outlook , 6 October 2026; World Bank, Middle East, North Africa, Afghanistan and Pakistan Economic Update (October 2026) , 6 October 2026; Youm7 (Arabic) , 6 October 2026; Al-Ahram Gate (Arabic) , 16 April 2025; US Department of State, U.S. Relations With Egypt , accessed 7 October 2026; Bnok24 (Arabic) , 24 September 2026.

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