Egypt's economic landscape is undergoing a significant transformation, and the International Monetary Fund (IMF) is deeply involved. This news is crucial for anyone interested in global finance and the future of the Egyptian economy. Let's dive in!
This report summarizes the findings of the IMF staff after their discussions with Egyptian authorities regarding the Extended Fund Facility (EFF) and the Resilience and Sustainability Facility (RSF). It's important to remember that these are preliminary findings, and the IMF's Executive Board will make the final decisions.
An IMF mission, led by Ms. Vladkova Hollar, visited Cairo from December 1-11 and held virtual discussions afterward. They discussed economic and financial policies that could finalize the Fifth and Sixth reviews under the EFF arrangement and the first review under the RSF.
So, what's the good news? The IMF team and Egyptian authorities have reached a staff-level agreement. Ms. Hollar stated that stabilization efforts have yielded important gains, and the Egyptian economy is showing signs of robust growth. This is particularly impressive considering the challenging regional security environment and global uncertainty.
Economic activity picked up to 4.4 percent in fiscal year 2024/25, up from 2.4 percent the previous year. This recovery was widespread, supported by strong performance in non-oil manufacturing, transportation, finance, and tourism. In Q1 FY2025/26, economic activity accelerated further, reaching 5.3 percent (y/y). The balance of payments has also improved, with a narrower current account deficit, buoyant remittances and tourism receipts, and strong growth in non-oil exports. External financial conditions eased in 2025, with non-resident inflows into local-currency debt rising to around USD 30 billion, and foreign currency reserves reaching USD 56.9 billion.
Fiscal performance remains strong. The primary balance surplus was 3.5 percent of GDP in FY 24/25. Tax revenues grew by 36 percent in FY 2024/2025 and 35 percent during July-November 2025/26, thanks to reforms. However, the tax-to-GDP ratio remains modest by international standards at 12.2 percent of GDP in FY24/25. Therefore, more work is needed to close the tax-to-GDP gap and put gross budget sector debt on a downward path while protecting social spending.
The Central Bank of Egypt (CBE) has maintained a tight monetary policy, cautiously easing to control inflation. Headline urban inflation edged up slightly to 12.3 percent (y/y) in November after hitting a 40-month low in September. This is due to tight fiscal and monetary policies, the elimination of FX shortages, and the dissipation of earlier exchange rate depreciation.
Here's where it gets controversial... The significant presence of state-owned banks requires strong governance to maintain financial health, strengthen monetary policy, and promote competition. The CBE is committed to third-party reviews to ensure best practices.
The authorities are committed to maintaining fiscal discipline, reducing gross financing needs, and lowering budget sector debt. They aim for a primary balance surplus of 4.8 percent of GDP this fiscal year and 5 percent of GDP in FY 26/27. A growth-friendly package of tax reforms is expected in January 2026 to increase tax collections by about one percent of GDP next fiscal year. While EGPC’s financial position remains a fiscal risk, recent measures have improved its finances, including cost recovery on products covered by the retail fuel indexation mechanism. The authorities also plan to increase allocations to the conditional cash transfer program (Takaful and Karama) and other social protection measures. The IMF suggested considering further increases in the budgetary envelope for these areas.
And this is the part most people miss... With macroeconomic stabilization underway, Egypt must transition to a more sustainable economic model by accelerating reforms to give the private sector more space to flourish. The authorities and the IMF team discussed the National Narrative for Economic Development, which prioritizes transforming Egypt's growth model toward a more competitive, private sector-driven economy. They have also improved the ease of doing business, especially in trade facilitation and streamlining tax-related procedures. The role of the state needs to be further reduced, including more progress with the divestment agenda.
Reforms related to the Resilience and Sustainability Facility (RSF) are on track, with the authorities implementing key measures related to mitigation (publishing a schedule for achieving renewable energy targets) and climate finance (a CBE directive mandating banks to monitor and report exposure to firms facing transition risks).
Finally, the IMF team expressed its gratitude to the Egyptian authorities for the constructive discussions and warm hospitality.
What do you think? Do you agree with the IMF's assessment, or do you have a different perspective on the challenges and opportunities facing the Egyptian economy? Share your thoughts in the comments below!
