Interest payments on public debt were up 34.6% y-o-y in 1H FY 2025-26 to EGP 1.3 tn on the back of higher overall debt levels and borrowing costs, according to the Finance Ministry’s latest financial performance report.

The spike in debt servicing costs effectively eclipsed a record tax collection, which jumped 32.1% y-o-y to EGP 1.2 tn during the six-month period. Increased tax collection pushed total budget revenues up 30.2% y-o-y to EGP 1.4 tn alongside a 12.8% jump in non-tax revenues to EGP 177.5 bn.

Despite efforts to curtail public spending increases, total public spending rose 26.9% y-o-y to EGP 2.2 tn, which the ministry attributed to a mix of rising wages, subsidies, and state investments, alongside debt service costs.

The result? The overall budget deficit widened 0.2 percentage points to 4.2% of GDP for the period, coming in at EGP 881.73 bn.

Why this matters: The government is running a tight ship on operations, but until interest rates fall significantly, the record tax checks you’re writing are going straight to the banks, not into the ground.

What’s next? The market is waiting for the Public Debt Strategy, which is expected to be out very soon. We expect the Ministry to outline a pivot away from expensive, short-term T-bills toward longer-tenor bonds now that interest rates have likely peaked. This will be followed by the Tax Policy Document, which must find a way to keep revenue growing without stifling a private sector that is already reeling from high costs.

Tags: