Ahmed Kamel – Egypt Daily News
Egypt’s public finances came under mounting pressure in the first half of the current fiscal year, as soaring debt servicing costs absorbed the vast majority of state revenues and pushed the budget deficit higher, according to official data released on Wednesday.
A report by Egypt’s Ministry of Finance showed that interest payments on public debt consumed about 92 percent of total government revenues between July and December 2025, underscoring the scale of the fiscal burden facing the country. Debt interest payments rose by 34.6 percent year on year to reach 1.26 trillion Egyptian pounds, making them the single largest component of public spending.
As a result, the overall budget deficit widened to 4.2 percent of gross domestic product during the first half of the fiscal year, compared with 4 percent in the same period of the previous year. The deterioration came despite solid growth in revenues, highlighting how sharply rising financing costs are offsetting gains elsewhere in the budget.
The figures confirm long-standing warnings by Egyptian officials about the strain caused by debt servicing. Finance Minister Ahmed Kouchouk has previously said that interest payments are swallowing most of the state’s revenues, a trend that was already evident in the 2024–2025 fiscal year, when the overall budget deficit doubled to 1.26 trillion pounds.
Despite the widening headline deficit, the report showed an improvement in the primary balance, a key indicator closely watched by lenders and investors. Egypt recorded a primary surplus of 1.8 percent of GDP, equivalent to 383 billion pounds, up from 1.3 percent in the same period a year earlier. The primary surplus means that government revenues were sufficient to cover expenditures excluding interest payments, reflecting continued fiscal discipline in areas such as subsidies and operating costs.
Budget revenues rose by around 30 percent during the first half of the fiscal year to reach 1.3 trillion pounds. Tax revenues accounted for the bulk of this increase, totaling about 1.2 trillion pounds, supported by higher collections from value-added tax, income taxes, and customs duties amid inflation and efforts to broaden the tax base.
Economists say the data illustrate the core dilemma facing Egypt’s economic policy. While the government has made progress in boosting revenues and maintaining a primary surplus, high interest rates, a weaker currency, and a heavy reliance on domestic and external borrowing continue to drive debt servicing costs upward. These costs limit the state’s ability to expand spending on social services, public investment, and growth-enhancing projects.
The pressure comes at a time when Egypt is implementing a reform program backed by international lenders, including the International Monetary Fund, which has emphasized the importance of reducing debt levels, extending maturities, and containing financing costs. However, global monetary tightening in recent years and Egypt’s own inflationary environment have made borrowing significantly more expensive.
With interest payments now consuming nearly all public revenues, analysts warn that sustaining fiscal stability will depend not only on continued revenue growth and expenditure control, but also on structural measures to lower debt and reduce reliance on short-term, high-cost financing. Without such steps, Egypt’s budget risks remaining trapped in a cycle where rising interest costs continue to erode the benefits of fiscal reform.
