Egypt’s PM signals he’s going to hold the line on economic reforms despite fallout from the war in the Gulf

Good morning, wonderful people. We’re doing a lot of “reading of coffee grounds” this morning on what is otherwise a fairly milquetoast news day: The economy took center stage as the PM addressed parliament yesterday — and the two biggest banks in the land unexpectedly hiked interest rates on three-year certificates of deposit.

Up first: Prime Minister Mostafa Madbouly addressed the House of Representatives yesterday on the fallout from the conflict in Iran, which continues to weigh on economies across the region.

Madbouly’s message was one part reality check, one part greatest hits, and two parts repackaging: On the reality check side of the house, he signaled that Cabinet is bracing for what could be an “extended crisis,” warning that the economic impact of the war in the Gulf is “likely to persist at least until the end of this year” even if the conflict were to end soon. It’s not what any of us wanted to hear, but it’s refreshing that the views of the private sector and of the state are roughly in sync — with each other, and with reality.

It’s costing a heck of a lot more to generate power, the PM noted, and tourism is taking a hit. The fiscal toll of the war, he said, has been heavy.

The greatest hits, part 1: The PM took something of a quiet victory lap, pointing out that the economy’s resilience in the face of the crisis — the EGP serving as a shock absorber, an inflation-targeting monetary policy, record reserves, etc., etc. — are the result of tough economic reforms on which his government has stayed the course. Expect more of the same, Madbouly suggested.

The greatest hits, part 2: The Oil Ministry’s 18-month-long campaign to re-engage with Big Oil also got a nod, with Madbouly telling MPs that we’ll have fully settled by June the arrears we owe international oil companies. He suggested there will be “more positive news” from the industry soon, signaling that energy security could get a welcome bump as new assets come into production.

The repackaging: The PM framed long-term trends and already-locked-in budget decisions as being key elements of his government’s response to the crisis:

• The government will buy more wheat this harvest season, he said — that was always the plan. The only ‘new’ bit is that the state will be paying farmers a bit faster.
• Renewable energy will be 45% of our energy mix by 2028 — an existing target toward which private producers and the state have been working for years, including the 2.5 GW of renewables and nearly 1 GW of battery storage that the PM highlighted will come online in 2026.
• The state is spending more on health and education — these have been policy priorities for years, and the earmarks for 2026-2027 aren’t growing out-of-step with the trend.
• The state will continue investing in public projects — again, the sums he’s discussing are entirely within trend. There’s no ramp-up in spending, no new counter-cyclical investment cycle kicking off here.

ALSO IN THE HOUSE yesterday: MPs gave preliminary approval to amendments to the Competition Law. If passed, the amendments will give the Egyptian Competition Authority the right to levy penalties directly, without the need to launch traditional criminal proceedings, and will place stricter oversight of mergers and acquisitions, with harsher penalties for violations affecting freedom of competition.

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Natural gas prices double

Fertilizer producers are now paying nearly double for natural gas compared to their March tab. Producers are being billed USD 9-10 per mm British thermal units (BTu) in the second half of April — up from USD 8.5 in the first half of the month, an industry insider tells EnterpriseAM. This represents a nearly 81% increase compared to USD 5.5 per mmBtu in March prior to the war-linked supply shocks.

“If global prices rise and a company’s export quota increases, that means the gas price supplied to it will also increase,” the source said, referring to the exit of key regional exporters including Saudi Arabia, Qatar, and the UAE from the market, along with China’s suspension of exports to US markets.

IN CONTEXT- The shift follows a pricing mechanism introduced in March tying gas costs directly to global urea prices — effectively wiring domestic input costs to export markets.

The trigger is external: Export urea prices have more than doubled this week to USD 880-890 per ton from some USD 420 before the end of February, driven by war-linked supply shocks tied to disruptions around Hormuz. That is a 110% jump feeding straight into Egypt’s new pricing formula.

Data point

EGP 2.4 tn — that’s the projected level of interest payments in the FY 2026-27 budget, up from EGP 2.29 tn in the current fiscal year, a 5.3% increase, according to the budget document seen by EnterpriseAM.

Meanwhile, debt service is expected to eat up 46% of total expenditures, down from 50% in the current fiscal year, while its share of projected tax revenues is set to decline to 68% from 82%, supported by expected growth in tax revenues to EGP 3.5 tn.

REMEMBER- The Finance Ministry is leaning on its public debt strategy to extend debt maturities to between 2.5-3 years, which should help reduce the overall interest burden on the budget over time.

PSA-

WEATHER- It’s another spring day in Cairo, with the capital looking at a sunny high of 27°C and a cool low of 17°C, according to our favorite weather app.

It’s more or less the same in Alexandria, with a high of 25°C and a low of 15°C.

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The big story abroad

The US-Iran ceasefire will continue until “discussions are concluded,” US President Donald Trump said on Truth Social. The move — made hours before the truce was set to expire — was prompted by diplomatic efforts by Pakistan and a lack of a “unified proposal” by Iran’s government, Trump said. Washington’s blockade will continue until an agreement is reached.

In the absence of a response from Tehran’s top leadership, Iran’s Tasnim News Agency stated that Tehran never sought a ceasefire extension and reiterated threats to break the US blockade by force. An adviser to Iran’s lead negotiator dismissed Trump’s announcement as insignificant.

As expected, global oil prices retreated on the news, despite an initial uptick at the opening of Asian trading earlier this morning. Brent crude is currently down 0.4% to USD 98.09 per barrel.

Mixed market response: The MSCI Asia Pacific ex-Japan Index eased 0.14%, dropping from a seven-week high. Japan’s Nikkei gained 0.5%, and South Korea’s Kospi eased around 0.6% in early trading this morning. US stocks are set to open in the green, with futures recording gains across the board.

How did Warsh’s confirmation hearing go? Trump’s Fed chair nominee Kevin Warsh affirmedthe Fed’sindependence during his Senate confirmation hearing, stating that Trump has not attempted to “predetermine, commit, fix or decide on any interest rate decision.” Warsh called for major reforms at the Fed, including a new framework for handling inflation, and took issue with the central bank’s “forward guidance” — the practice of signaling the future trajectory of rates.

And your daily dose of AI news: SpaceX has gained the “right to acquire” AI startup Cursor for USD 60 bn, agreeing to pay USD 10 bn if it does not proceed with the transaction. The potential acquisition of Cursor — which enables users to edit code with AI — is seen as a way for Elon Musk to catch up in the AI race ahead of SpaceX’s IPO.

*** It’s Hardhat day — your weekly briefing on all things infrastructure in Egypt: EnterpriseAM’s industry vertical focuses each Wednesday on infrastructure, covering everything from energy, water, transportation, to urban development, as well as social infrastructure such as health and education.

In today’s issue: We take a deep dive into how the government is adding cybersecurity to our national borders, mandating strict testing on imported hardware and physically isolating the networks that run critical utilities.