The agreement, subject to IMF Executive Board approval, would unlock approximately $1.5 billion under the EFF and $136 million under the RSF, bringing total disbursements under the arrangements to about $7.2 billion.
The IMF said discussions with Egyptian authorities covered economic and financial policies aimed at supporting stability and growth amid global and regional challenges. Talks were held in Cairo from May 11 to May 21 and continued virtually thereafter.
Despite the impact of the war in the Middle East, Egypt’s economy has remained relatively stable, supported by policy measures such as fuel and electricity price adjustments, energy consumption controls and increased social spending to protect vulnerable groups.
Economic performance has been strong, with real gross domestic product (GDP) growth reaching 5% in the third quarter and 5.2% for the first three quarters of the fiscal year. However, inflation has risen, and the current account deficit has widened slightly, reflecting higher import costs.
Gross international reserves remained stable, while recent improvements in investor sentiment, linked in part to the United States–Iran agreement, have supported a recovery in portfolio inflows and eased pressure on the exchange rate.
The IMF cautioned that risks remain, including potential renewed inflationary pressures, geopolitical tensions and tighter global financial conditions. However, easing global energy prices and improved investor confidence could provide upside support.
Fiscal performance has been notably strong, with Egypt exceeding targets for both primary balance and tax revenue. The primary surplus is expected to increase to 5% of GDP in the next fiscal year, reflecting ongoing efforts to strengthen public finances.
The IMF noted that tax reforms and improved administration are boosting domestic revenue, with the tax-to-GDP ratio projected to rise further. These gains are expected to support increased social spending, although further work is needed to expand safety nets for vulnerable households.
Public debt management remains a priority, with authorities aiming to reduce financing needs through measures such as extending debt maturities and using proceeds from asset sales to strengthen fiscal sustainability.
Inflation remains elevated, with projections indicating it could reach 15.8% by the end of the fiscal year, driven by energy prices and earlier exchange rate depreciation. The IMF said maintaining a tight monetary policy stance will be necessary to contain inflationary pressures.
The Fund also emphasised the importance of exchange rate flexibility as a key tool to absorb external shocks.
Structural reforms continue to be central to Egypt’s economic strategy, with a focus on improving the business environment, enhancing governance and supporting private sector growth. The implementation of the State Ownership Policy, including reducing the government’s role in certain sectors, is seen as critical to boosting investment and job creation.
Progress has also been made under the RSF, particularly in integrating climate considerations into public investment planning and advancing efforts to mobilise climate finance.
The IMF said continued reform implementation will be essential to strengthening resilience, sustaining growth and improving economic opportunities in Egypt.
–IMF/ChannelAfrica–
