Maged Mandour is a political analyst and author of “Egypt Under El-Sisi: A Nation on the Edge.” He writes for multiple outlets and has made several media appearances as an expert on Egyptian politics and the Sisi regime.
On Aug. 10, Egyptian President Abdel Fattah El-Sisi approved a proposal to issue a new debt instrument dubbed the "Taxation Sukuk," a purchasable form of government debt similar to a bond. The proposal's goal is to ease the burden of Egypt's debt payments on its budget and, in turn, the broader economy. This new debt instrument, however, will erode the state's already weak fiscal basis, further shifting the burden onto Egypt's most vulnerable and away from wealthy regime insiders. The results will be clear: worsening corruption at the expense of working-class citizens.
The State will issue the new debt instrument with a maturity of one year, with the first issuance planned for the current financial year. It will repay buyers by compensating the bond's value and the interest accrued, deducting the value of that debt holder's future taxes. In other words, the proposal's stated aim is to alleviate mounting pressure on public finances by allowing the state to collect taxes in advance via revenues generated through the debt instrument. Debt payments consumed 76% of state revenues in the first 10 months of the last fiscal year, severely impacting the state's capacity to effectively govern or pull the country out of its long-running economic malaise.
This new debt instrument, however, will erode the state's already weak fiscal basis, further shifting the burden onto Egypt's most vulnerable and away from wealthy regime insiders. The results will be clear: worsening corruption at the expense of working-class citizens.
- Maged Mandour
A deeper look at the underlying logic of this new policy reveals the corrupt dynamics at play. First, the value of the bond is used to both pay future taxes and the interest accrued on that bond, which is also tax-free. Essentially, the state is not only forgoing future revenue streams related to the nominal value of the bond, but also the interest accrued. Considering that the interest rate currently stands at 19%, with national inflation at 13%, one would expect the interest rates offered to equal at least 20% to attract investors. This will cause tax revenues to drop disproportionately if this scheme is successfully implemented.
In simpler terms, for every Egyptian Pound (EGP) that the regime collects today through the Taxation Sukuk, it will lose that pound plus the interest paid to the bondholder in the form of tax credits at a later date of no less than one year, rapidly deteriorating future tax income.
Tax revenue constitutes 85% of state revenue. The new policy will deal a devastating blow to public finances, possibly forcing the regime to increase monetary supply by printing money to meet its domestic debt obligations. That approach, however, will increase inflation, punishing the most vulnerable in Egyptian society.
The debt instrument's regressive nature will further affect the poor and middle classes disproportionately, as it is out of reach for working Egyptians. These classes cannot afford these bonds due to high inflation and the dwindling purchasing power of the EGP, leaving them with limited disposable income to buy the bonds and, in turn, pay their taxes in advance for a profit later.
The most likely buyers of these bonds will be elites, alongside larger corporations and state-owned companies. These entities will reduce their already light tax loads even further, degrading Egypt's broken tax system while placing the negative effects squarely on working people who cannot benefit from the scheme. In this regard, working Egyptians lose twice: they cannot access the tax rebates stemming from refunds for bond purchases and will be most impacted by the overall negative economic impacts that will result.
The new policy will leave a devastating blow to public finances, possibly forcing the regime to increase monetary supply by printing money to meet its debt obligations. That approach, however, will increase inflation, punishing the most vulnerable in Egyptian society.
- Maged Mandour
The planned budget for the previous fiscal year highlights this trend. Taxation on consumption stood at 1 trillion EGP, while taxation on corporate profits and bonds stood at 332 billion EGP each. Taxes on corporate profits and bonds will experience a major reduction from tax write-offs under the new bond system once elites move to reduce their tax burdens. As tax incomes dwindle, the regime will be left with two policy options: Increase taxation on consumption or introduce additional austerity measures. Both will cause immense suffering in a country with an estimated poverty rate of 36% as of 2023.
There is an argument to be made that this new instrument can help alleviate the debt crisis by reducing Egypt's need to borrow to make debt payments. The size of the expected obligations, however, speaks against this logic, with $62.8 billion (3.1 trillion EGP) in external debt due between March 2026 and April 2027. That sum includes $21.1 billion (1 trillion EGP) due to the Gulf states. The Gulf is expected to allow this debt to roll over to the following year, as they would like to avoid Egypt's financial collapse after their historic investments into the country to prop it up. Yet even with that rollover, a heavy burden of $41.1 billion (2 trillion EGP) remains on the state budget, consuming half of Cairo's revenues. Those numbers do not consider internal debt repayments, a similarly heavy weight on expected external financing needs standing at $9 billion (455 billion EGP) for the coming financial year.
The Egyptian state argues that it can use the new bonds to reduce the crushing debt burden if it remains attractive and if it is consistently sold annually. This argument, however, ignores the tax-exempt interest rates payable on the bond that will continue to corrode state revenue, producing a disproportionate loss of tax revenues. The long-term effects will be catastrophic as elites deepen their robbery of the people's funds held by the state.
Out of desperation, the regime is opting for self-defeating "solutions" to a problem of its own making. Rather than implementing necessary tax reforms and ending the vast tax exemptions and low taxes already enjoyed by the military, corporations and a plugged-in elite, Cairo is doubling down on policies that will continue to harm Egypt and Egyptians.
These policies also mean that external capital flows will continue to play a crucial role in backstopping Cairo's economic model, without which it would face imminent collapse, thus reinforcing the system currently tearing apart the country along class lines while ceding sovereignty abroad. Placing this in context, the regime received $200 billion in loans, grants and assistance from the Gulf and international development and financial institutions between 2014-24. It received an additional $87 billion in pledges, real estate investments and official assistance between 2024-25. These sums are vast for a country of roughly 120 million people and a gross domestic product that struggled to reach a mere $365 billion in 2025.
That model props up a failing economic system while supporting a regime that is deeply repressive. In this context, the European Union's release of a 1.5 billion Euro (89 billion EGP) loan in July, despite the European Commission documenting that the Egyptian state failed to fulfil necessary democracy and human rights improvements. These actions and many others like them from countries like the United States are a form of complicity, allowing Sisi and his cronies to continue policies of mass repression, arbitrary detention and widespread human rights abuses, despite their efforts to whitewash such crimes.
In the end, Egyptians remain trapped between a complicit international system and a regime that is unwilling to implement real, necessary reforms that benefit all citizens. In its search for a magical solution, and out of palpable desperation, the state is adopting policies that will endanger the very foundation of its own fiscal viability while enriching regime insiders for short-term stability, leading to widespread misery.
The views and positions expressed in this article are those of the author(s) and do not necessarily reflect the views of DAWN.
