Fiscal Sustainability and Its Implications for Economic Growth in Egypt: An Empirical Analysis

This study examines the association between fiscal sustainability indicators and Egypt’s economic growth from 1980 to 2018. Fiscal sustainability refers to a government’s ability to generate sufficient revenue to cover its costs and debt obligations in the long run without excessive borrowing or money creation. Egypt’s economic growth has slowed, raising questions about fiscal sustainability. This study aimed to analyze the dynamic relationship between fiscal sustainability indicators (government revenue, expenditure, external debt) and economic growth in Egypt. The autoregressive distributed lag (ARDL) bounds testing approach and unrestricted error correction model were applied to annual data from 1980 to 2018. A dynamic link was found between fiscal sustainability indicators and economic growth. Government expenditure and external debt significantly impacted economic expansion in the long term, while government revenue did not. Fiscal sustainability, measured by growth in total government expenses, external debt obligations, and revenue, significantly influences Egypt’s economic growth. Prudent fiscal management is crucial for sustained economic development. Policymakers should focus on controlling government spending, limiting external debt, and improving revenue generation to promote long-term economic growth in Egypt. Fiscal sustainability must balance critical investments in public services. Carefully managing fiscal deficits is key to unleashing Egypt’s economic potential. This study provides valuable insights into the connection between fiscal policy and economic growth in Egypt, informing policymakers’ decisions. Plain Language Summary Economic development potential in Egypt The research examines the relationship between long-term fiscal policy and economic growth. We used data from 1980 until 2018 to determine Egypt’s capacity to cover its spending. The slowdown of economic development is a major reason for this research. The development trend of a country is an important signal of its further potential of being sustainable. Added value is crucial for ensuring equitable behavior across generations. Multiplying debts instead will diminish the capacity of the next generation to benefit from the same conditions as the generation before. Policymakers should decide on the implementation of strategic goals for this to happen. Our results highlight a dynamic link between fiscal sustainability indicators and economic growth. In the long term, government