Egypt’s House of Representatives approved the 2025-2026 state budget on Tuesday, despite sharp criticism from some lawmakers who argued that Prime Minister Mostafa Madbouly’s government is “unfit for wartime conditions.”
The budget debate took place during a tense parliamentary session, where Finance Minister Ahmed Kouchouk defended the fiscal plan as targeting a debt reduction of $1-2 billion next year. The vote came amid deepening regional instability following Israel’s continued offensive on Gaza and hostilities between Israel and Iran.
“We need a wartime government. This one simply isn’t up to it,” said Abdel Moneim Imam, secretary of the Planning and Budget Committee, who linked his rejection of the budget with regional and international developments. He also cited the continued rise in Egypt’s domestic and foreign debt since Madbouly assumed office in 2018.
MP Ahmed El-Sharkawy also opposed the proposed budget, calling the situation a “disaster” and warning that the budget deficit and interest payments reflect a decade of ineffective fiscal and economic policy. “The regional situation demands precautionary measures and readiness for any scenario,” he said.
Israel’s war on Gaza, which intensified after the Al-Aqsa Flood operation, has already cut into Suez Canal revenues, particularly after Yemen’s Houthi forces began military action in solidarity with Gaza. The conflict expanded further on Friday with a fresh Israeli assault on Iran.
Finance Minister Kouchouk acknowledged the strain of debt servicing, which he called Egypt’s “biggest challenge,” but noted that interest payments will drop by at least 800 billion Egyptian pounds if inflation and rates decline. He said debt was 96% of GDP in June 2023, falling to 89% in 2024, with a goal of 82% next year.
Responding to parliamentary recommendation, the Finance Ministry will also launch a four-year medium-term debt strategy by September or October, Kouchouk announced.
To boost revenues, the government continues expanding its tax base, with Kouchouk saying in May that 2024 saw the highest increase in tax revenue since 2005. Nonetheless, debt interest payments will consume 50.2% of public spending in the new fiscal year starting July, compared to 31.9% in 2021-2022.
The government plans to spend a total of 4.57 trillion pounds. A large portion of this, 2.30 trillion pounds, will go towards paying interest on debt. Other significant expenses include 0.68 trillion pounds for salaries and employee compensation and 0.74 trillion pounds for subsidies, grants, and social benefits.
To fund this spending, the government expects to collect 2.65 trillion pounds in taxes. The remaining funds will come from new government borrowing and debt instruments, totaling 3.58 trillion pounds, though 2.08 trillion of this will be used for capital repayments.
