MPs approve another tough budget

Al-Ahram Weekly

19-06-2025

Following a month of debates, Egypt's 2025-26 budget received parliament's final approval on Tuesday. While pro-government MPs affiliated with the Mostaqbal Watan (Nation's Future), Homat Watan (Protectors of the Nation), and the People's Republic Parties gave the thumbs up to the budget, between 15 and 20 opposition MPs rejected it.
Regional tensions and the repercussions of the Iran-Israel war dominated the final discussion of the budget.
Head of the Budget Committee Fakhri Al-Fiqi said the 2025-26 budget was being discussed and voted on under exceptional circumstances that would have a direct impact on the Egyptian economy.
'We know that the government is exerting tremendous efforts to address the repercussions of the Iran-Israel war, but we have to be vigilant because it may need to modify the budget to contain any unexpected developments,' Al-Fiqi said.
He pointed out that the country was already facing many economic challenges starting with the significant drop in Suez Canal revenues due to the Gaza war and attacks on ships in the Red Sea, let alone an expected surge in oil prices this summer on the back of the Iran-Israel war and a probable closure of the Strait of Hormuz.
In response, Planning Minister Rania Al-Mashat agreed that the state's 2025-26 budget and socio-economic development plans would come into effect on 1 July amid challenging circumstances.
'As everybody knows, the current situation in the Middle East has become more complex in the light of the negative developments resulting from the Iran-Israel war, which increase uncertainty and require a flexible approach and continuous monitoring of the budget and plan's objectives,' she said.
She emphasised that the government is closely observing the economic impacts of the Iran-Israel war on Egypt. Prime Minister Mustafa Madbouli has issued a decree forming a Crisis Committee headed by him to monitor the repercussions of the Iran-Israel military operations, which will help Egypt prepare to contain any negative developments.
She indicated that the government is building on the reforms it has implemented in the last two years to enhance the resilience of the Egyptian economy and its ability to adapt to changes and absorb shocks.
She stressed that the only guarantee to avoid the new challenges is for the government to continue implementing its structural reform programme, which is based on three main pillars: consolidating macroeconomic stability to enhance the country's resilience in the face of external shocks; improving the business climate; and increasing private-sector investments.
The new budget and socio-economic development plan aims to achieve an economic growth rate of around 4.5 per cent, which is relatively high compared to the modest rate of 2.4 per cent targeted in 2023-24.
'The high growth rate reflects a trend towards continuing the economic recovery, while simultaneously ensuring that the repercussions of geopolitical and economic developments in the Middle East and the world, and the uncertainty resulting from them, are contained,' Al-Mashat said.
Finance Minister Ahmed Kouchouk said that the new budget includes exceptional increases in allocations to stimulate economic activity, amounting to three times what was allocated in previous years, a step he described as 'necessary' to support the national economy.
Kouchouk told MPs that the 2025-26 budget aims to achieve a set of key objectives, most notably enhancing social protection, supporting economic activity, and reducing the debt and deficit rates.
Revenues in fiscal year 2025-26 are expected to increase by 24 per cent to reach LE3.1 trillion ($61 billion), compared to LE2.5 trillion in 2024-25. Meanwhile, expenditure is expected to increase by 21.1 per cent to LE4.6 trillion ($91 billion), compared to LE3.8 trillion in 2024-25.
Kouchouk said that most of the increase in revenues will come from taxes, which are expected to hit a record LE2.6 trillion, up from LE2 trillion in 2024-2025, noting that this increase is not a result of imposing new taxes.
'It comes as a result of new legislation that offers a generous package of incentives, as well as the resolution of years-long tax disputes, a step which has encouraged a large number of informal businesses to voluntarily join the tax system,' Kouchouk said.
He noted that the public debt-to-GDP ratio had dropped to approximately 82 per cent, in parallel with declining inflation and interest rates, which would lead to a significant improvement in debt-servicing.
He stressed that the government is working hard to reduce external debt by $1-2 billion annually.
Kouchouk said public revenues are witnessing notable growth, with a significant portion being restructured to meet urgent needs. He stressed that these trends reflect the state's commitment to achieving a balance between social dimensions and financial stability, while improving people's quality of life and supporting the most vulnerable groups.
An amount of LE742.6 billion will be allocated to social-protection programmes in the form of subsidies, grants and benefits with a 16.8 per cent increase. Ration card subsidies will reach LE160 billion, a 19 per cent increase, and subsidies on fuel products and electricity will cost LE150 billion.
Ibrahim Al-Heneidi, head of parliament's Legislative and Constitutional Affairs Committee, said Egypt will top the list of countries that will be directly impacted by the Iran-Israel war and that it will not be immune to its financial and economic ramifications.
'The question now is how the new budget will be able to contain the negative ramifications of this war,' Al-Heneidi said.
The 2025-26 budget was rejected by most opposition MPs, who directed scathing attacks against the performance of the government of Prime Minister Mustafa Madbouli.
MP Abdel-Moneim Emam, head of the Al-Adl (Justice) Party, said that the government was not fit to be a war government after its poor performance in the face of previous crises and its overdependence on borrowing.
Ahmed Al-Sharkawi, an MP affiliated with the leftist Egyptian Socialist Democratic Party, voiced concerns about mounting domestic and external debt. 'We are in a catastrophe caused by successive governments and budgets, as a result of a series of economic and financial decisions over the course of ten years,' Al-Sharkawi said.
Maha Abdel-Nasser, another leftist MP, said that 'I can't approve a budget where 65 per cent of revenues are allocated for debt-servicing alone.'
* A version of this article appears in print in the 19 June, 2025 edition of Al-Ahram Weekly
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