President approves voluntary certificates redeemable against future taxes as government seeks cheaper financing and prepares implementation rules
Egypt is preparing to activate a tax-financing mechanism that would allow taxpayers to provide funds to the Treasury in return for certificates redeemable against future tax liabilities, as the government seeks to reduce borrowing requirements and debt-servicing costs.
President Abdel Fattah El-Sisi approved the proposal on August 10 during a meeting with Prime Minister Mostafa Madbouly and Finance Minister Ahmed Kouchouk. The Presidency said the certificates would be funded voluntarily by taxpayers, deducted from future tax liabilities and carry a favourable return.
The government has yet to announce the yield, maturity, subscription limits or redemption rules, which will determine whether the instrument develops into a meaningful alternative to conventional borrowing.
The proposal forms part of a broader fiscal and tax-reform agenda. Kouchouk said real GDP expanded 5.2% during the first nine months of FY2025/26, while the Presidency said budget-sector debt as a share of GDP had fallen by about 13.2 percentage points over the previous two years.
El-Sisi also directed the government to proceed with a third package of tax facilitations aimed at simplifying procedures, improving taxpayer services and strengthening confidence with investors.
Existing Law Provides the Basis
Although the certificates would represent a new financing tool in practice, their legal foundation dates back more than two decades.
Article 115 of Income Tax Law No. 91 of 2005 authorises the finance minister to issue tax certificates subscribed to by taxpayers. The provision allows the minister to determine a tax-exempt return and gives both the certificate value and accrued return discharge value when settling taxes due.
The current process therefore centres on activating that provision and establishing the detailed framework governing issuance, pricing and redemption.
Ragab Mahrous, adviser to the head of the Egyptian Tax Authority, said after the presidential announcement that participation would be voluntary, the return would be tax-exempt and the implementing rules were expected within about three weeks.
The precise eligibility criteria and whether certificates will be transferable have also yet to be formally announced.
Bringing Future Tax Receipts Forward
Under the proposed mechanism, an eligible taxpayer would provide funds to the Treasury and receive a certificate carrying a specified return. The certificate and eligible accumulated return could later be used to settle part of the taxpayer’s obligations.
For the Treasury, the attraction is access to cash before the corresponding taxes would normally be collected. If that funding replaces debt carrying a higher effective cost, the mechanism could reduce financing expenses.
For companies, participation would amount to an investment decision, with the tax-free return weighed against alternative uses of corporate liquidity.
The certificates do not create additional tax revenue. They bring forward part of future receipts, meaning the government gains liquidity now but receives less fresh cash when the certificates are eventually redeemed.
That trade-off is particularly important in Egypt because taxation provides the overwhelming majority of recurring government income. Ministry of Finance data show tax revenues accounting for about 87% of total revenues, making the protection of future cash collections a central consideration in the programme’s design.
The instrument would therefore deliver a genuine fiscal benefit only if its effective cost remains below the marginal cost of the borrowing it replaces and if future redemptions remain contained.
MEO Research: Safeguards Against Future Revenue Pressure
MEO Research Department considers the certificates potentially useful provided the amount of future tax revenue committed through the programme remains limited.
It recommends an initial ceiling under which the total value redeemable by an individual company in any fiscal year, including principal and accrued return, does not exceed 15% of its average annual direct corporate income-tax payments over the preceding three completed tax years.
VAT, employee withholding and similar taxes collected by companies on behalf of the state should be excluded from that calculation.
MEO Research also proposes an aggregate ceiling of around 3% of projected national tax revenues on certificates redeemable in any fiscal year. Redemption dates could be staggered to reduce the risk of claims becoming concentrated in a single budget period.
These thresholds are MEO Research recommendations and have not been announced by the government.
Yield Will Determine the Benefit
The return offered on the certificates will be central to whether the mechanism produces genuine fiscal savings.
It must be high enough to attract voluntary subscriptions while remaining below the government’s marginal borrowing cost.
A tax-exempt return could help bridge that gap because companies would compare it with the after-tax yield available from alternative investments, while the government would compare its own cost with the debt financing it would otherwise raise.
If the certificates replace more expensive borrowing, they could provide the Treasury with a useful additional financing channel. If their effective cost approaches that of conventional government debt, the main benefit would instead be funding diversification and cash-flow management.
Rules Expected Within Weeks
The proposal has now moved from presidential approval to the implementation-design stage.
The underlying statutory authority already exists under the 2005 Income Tax Law, while the detailed rules needed to activate the certificates are being prepared.
Mahrous said on August 10 that the framework should be issued within about three weeks, pointing to greater clarity around the end of August or beginning of September 2026.
No official subscription or launch date has yet been announced. Actual implementation will depend on the completion of the regulatory and administrative procedures.
The forthcoming rules — particularly the yield, maturity, issuance limits and redemption conditions — will determine the programme’s fiscal significance.
For Egypt, the opportunity is to convert part of predictable future tax receipts into potentially lower-cost liquidity today. The corresponding risk is committing too much of the tax revenue required to finance future budgets.
The programme’s ultimate test will be whether it lowers Egypt’s financing costs without materially reducing the cash tax revenues available to future budgets.
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