Energy subsidies down, export subsidies up in new budget draft

The government will be implementing sweeping cuts to spending on petroleum subsidies and prioritizing export spending in the upcoming fiscal year’s budget, according to draft data submitted by the Finance Ministry to the House of Representatives on Wednesday. The data, reviewed by Mada Masr, also showed a major boost in public healthcare expenses, while other social support categories stayed more or less stable in line with predicted inflation. The budget for fiscal year 2026/27 is being prepared as the Cabinet weathers intense fiscal pressure caused by the ongoing closure of the Strait of Hormuz and the resulting price hikes rolled out in the wake of the war launched by Israel and the US on Iran. One of the highest increases in subsidy spending is dedicated to support medical treatment, though spending on education and health remains significantly below the levels mandated by the 2014 Constitution. The largest increase, however, is directed toward export subsidies — demonstrating a clear direction of the government prioritising the business environment over social support. Interest payments, meanwhile, continue to account for nearly half of total government spending. Allocations in the new budget are set to increase by 25 percent for health, 11.5 percent for pre-university education and 11 percent for higher education, Planning Minister Ahmed Rostom told Parliament on Wednesday. Finance Minister Ahmed Kouchouk , speaking at a symposium hosted by the Coordination’s Committee of Party’s Youth Leaders and Politicians on Tuesday, likewise stressed that “the new budget includes a significant increase in human development sectors.” He added that spending on health and education is set to rise and shows a clear prioritization of improving basic services provided to citizens. Spending on health and education as a share of GDP is set to improve in the upcoming fiscal year, compared with the allocations made in the current year for education and in the previous three years for health. Based on the figures reviewed by Mada Masr, education is set to receive 1.51 percent of GDP and health 1.72 percent in FY2026/27. State budgets retrieved via the Finance Ministry and Mada Masr calculations But this amounts to only half or less of the sectors’ respective constitutionally mandated minimum spending thresholds of three percent and six percent of GDP. The government has failed to comply with these requirements since they came into force, instead circumventing them by saying it has adopted a different method for calculating these allocations. Graph comparing expenditure on health and education as a percentage of GDP in the draft budget for FY2026/27 in comparison to constitutionally mandated minimums. Source: Data from the Finance Ministry submitted to members of the House of Representatives and calculations by Mada Masr Aside from those for health and education, targets for the new fiscal year show varying trends in spending on subsidy, grants and social benefit items. After the government hiked fuel prices for both the public and industry in recent weeks as prices spiral on global markets amid the war, expenditure on subsidies for petroleum products is set to decline by more than 79 percent. While rising fuel prices have affected households and industry already, the impact of higher fuel costs for industry is more than offset by an 85 percent increase in export subsidy expenditure in the FY2026/27 budget. This expenditure will benefit investors and business owners to access more lucrative export markets and boost profits, even though they are classified in the budget under the “subsidies, grants and social benefits” category. Expenditure on supporting medical treatment expenses is set to increase by 53 percent, too. But key remaining subsidy items, including food commodities, passenger transport and contributions to pension funds, hover in parallel with the new budget’s target inflation rate for the coming fiscal year: around nine percent. This rate also serves as a key factor driving nominal spending growth across various budget items. Source: Estimates for the new fiscal year and the medium-term budget framework As for interest payments, estimates for the new fiscal year show that they account for nearly 47 percent of total budget expenditure. The remaining 53 percent will accordingly be distributed across the other five expenditure categories: wages, the purchase of goods and services, other expenses, public investments and subsidies, grants and social benefits. Interest payments accounted for 50.2 percent of expenditures in the current fiscal year, according to data the government shared with the House of Representatives on Wednesday. Source: Estimates for the new fiscal year and the medium-term budget framework The data submitted to the House of Representatives does not reflect the “total budgetary uses,” which refers to another way of looking at annual spending by adding principal debt repayments and the acquisition of financial assets — categories that are excluded from the budgetary expenses model submitted Wednesday. The data submitted by the government to Parliament show a direction to reduce general government debt, including both on and off-budget debt, by around half a percentage point, bringing it down to 89.5 percent of GDP. The data also project a three percent reduction in budget sector debt, to 78.1 percent of GDP. Prime Minister Mostafa Madbuly stated in December that the state is “working to reduce debt to a level not seen in Egypt since it first accumulated debt about 50 years ago,” without specifying how this target would be achieved. A government-affiliated source, speaking to Mada Masr at the time on condition of anonymity, said Madbuly was effectively reiterating earlier government commitments to reduce budget sector debt to below 70 percent within five years by undertaking debt for assets swaps: essentially a debt restructuring rather than a real reduction in liabilities. They also suggested that the prime minister’s statements were aimed at boosting his popularity ahead of a rumored cabinet reshuffle. The post Energy subsidies down, export subsidies up in new budget draft first appeared on Mada Masr .