The International Monetary Fund (IMF) has approved the disbursement of $1.2 billion to Egypt after completing the fourth review of the country’s $8 billion economic reform program, according to a statement released on March 11. This funding is aimed to support economic stability, reduce fiscal deficits, and promote sustainable growth.
The IMF Executive Board has also approved the authorities’ request for an arrangement under the Resilience and Sustainability Facility (RSF), with access to about $1.3 billion, the international lending agency stated.
Outlook on Egypt’s growth prospects
The IMF has made several recommendations to improve Egypt’s structural policies, including strengthening the operational independence of the Egyptian Competition Authority (ECA) and assessing governance practices in Egypt’s public banks. These measures aim to enhance competition in markets and improve financial sector efficiency, according to a statement from the IMF.
The IMF also noted Egypt’s need to shift toward a private sector-driven, export-led economy while improving economic resilience. The key policy priorities should include reducing the state’s footprint, offering a more level playing field to encourage private sector investment and competition, allowing energy price reforms, improving governance and transparency, introducing flexible exchange rate and inflation targeting, and investing in green energy and sustainable agriculture.
“Notably, gross domestic product (GDP) growth has shown signs of recovery, inflation is moderating, and foreign exchange reserves are adequate. Fiscal consolidation under the EFF-supported program has progressed, with the government achieving a primary fiscal surplus of 2.5% of GDP in FY2023/24,” said Nigel Clarke, Deputy Managing Director and Chair of the Executive Board at the IMF in a statement.
“However, high debt, substantial financing needs, and domestic rollover risks remain significant medium-term challenges, while mixed progress on structural reforms hinders growth and constrains private sector development.”
Moataz Yeken, chief economist at Lynx Strategic Business Advisors, commented on the financing package, stating that the new funds will help Egypt manage foreign currency. He emphasized the importance of the flexible exchange rate reform, noting, “As long as nothing has changed, we will remain in the 50, 51, and 52 EGP/$ level,” he told Business Monthly.
In January, a staff-level agreement was signed by the IMF and Egypt following the fourth review of the 46-month Extended Fund Facility (EFF) in December last year.
External risks and flexible exchange rate transition
According to the IMF statement, Egypt continues to face significant external risks. The ongoing conflict in Sudan has disrupted Red Sea trade, resulting in a $6 billion decline in foreign exchange inflows from the Suez Canal in 2024.
Nevertheless, the IMF commended Egypt for successfully transitioning to a flexible exchange rate regime in March 2024. This shift has helped narrow the gap between official and parallel exchange rates, cleared import backlogs, and increased trading activity in the interbank market.
Although exchange rates remain volatile, the IMF stresses the importance of continued oversight to ensure that the reform process remains solid and that businesses and investors view the exchange rate as genuinely flexible over time.
Economic performance
The IMF also foreshadowed that despite a slowdown in GDP growth—from 3.8% in FY2022/2023 to 2.4% in FY2023/2024—there are signs of recovery. The first quarter of FY2024/2025 saw a positive rebound, with GDP growth reaching 3.5% year-on-year.
According to the World Bank’s “Global Economic Prospects” report, Egypt is forecasted to have a real GDP growth rate of 3.5% for FY2025 and 4.25% for FY2026. Similarly, the IMF’s 2025 “World Economic Outlook” report projects growth at 3.6% and 4.1% for the same years, revised down by 0.5% for FY2025 and 1% for FY2026 from its 2024 outlook.
Yeken attributed the decline in the GDP forecast to escalating political tensions, global supply chain disruptions, and economic uncertainty. “What will fix the economy is increasing competitiveness, increasing production, and increasing investments,” he said.
The IMF also noted that Egypt’s current account deficit widened to 5.4% of GDP, highlighting a growing gap between imports and exports. On a positive note, Egypt’s primary fiscal balance improved by 1 percentage point, reaching 2.5% of GDP, thanks to effective government spending controls that offset weaker-than-expected domestic revenue.
Meanwhile, inflation has shown a marked decline. Egypt’s annual headline inflation dropped to 12.5% in February, reflecting a 10.7% decrease from January and signaling the effectiveness of Egypt’s monetary policies. However, Yeken pointed out that February’s decline was partly due to a base effect, as prices were exceptionally high at the time. He also noted the stability in the market and the positive effects of high foreign exchange reserves.
Regarding interest rates, Yeken suggested the Central Bank of Egypt (CBE) should wait until the end of the fiscal year before making any changes.
“The government needs to support the private sector and provide incentives to SMEs to increase investments and productivity,” he added.
The IMF’s approval underscores progress in fiscal consolidation under the EFF-supported program.
Egypt is targeting a primary fiscal surplus of 4% of GDP in FY2025/2026 and 5% in FY2026/2027. The IMF has also approved Egypt’s request to recalibrate its medium-term fiscal commitments, focusing on maintaining a surplus in the primary balance.
