- IMF Releases US$1.77 Billion to Egypt as War Risks Test Economic Recovery
The International Monetary Fund has approved the immediate release of about US$1.77 billion to Egypt after completing reviews under two financing arrangements, citing resilient economic growth and strong fiscal performance while warning that inflation, public debt and the state’s large economic footprint remain significant risks.
The IMF Executive Board completed the seventh review under Egypt’s Extended Fund Facility and the second review under the Resilience and Sustainability Facility.
The decision allows Egypt to draw SDR1.11 billion, equivalent to about US$1.50 billion, under the EFF and SDR200.00 million, or approximately US$272.00 million, under the climate-focused RSF.
Total purchases and disbursements under the two programmes have now reached about SDR5.40 billion, equivalent to US$7.30 billion.
The Fund said Egypt had entered the latest period of Middle East conflict from a stronger macroeconomic position than during previous external shocks.
Exchange-rate flexibility, fuel-price adjustments and measures to contain government spending helped limit the impact of higher energy costs and geopolitical uncertainty on the economy.
Real gross domestic product expanded by 5.00% in the third quarter of the 2025/26 financial year, bringing growth during the first nine months to 5.20%.
Full-year growth is projected at approximately 4.60%, only 0.10 percentage points below the forecast made during the previous programme reviews.
However, the delayed effects of the conflict, including weaker investment, higher production costs and persistent uncertainty, are expected to moderate growth to 4.40% in 2026/27.
Inflation remains one of the most immediate policy challenges.
Headline inflation increased to 15.20% in March 2026, approximately 1.40 percentage points above IMF staff expectations, following exchange-rate depreciation and higher energy prices.
It subsequently eased to 14.30% in June, although core inflation also stood at 14.30%, indicating that price pressures had spread beyond volatile food and fuel components.
The IMF expects inflation to rise to 16.70% during the second half of 2026 because of higher energy prices, currency depreciation and unfavourable statistical base effects.
That forecast delays Egypt’s expected return to the central bank’s inflation target range by about one year.
The Fund therefore urged the Central Bank of Egypt to maintain an appropriately tight monetary stance, supported by clear communication and continued exchange-rate flexibility.
Egypt’s external position has also come under pressure from higher oil and gas costs.
The current-account deficit is estimated at 4.50% of GDP in 2025/26, although record remittance inflows, strong tourism earnings and a gradual recovery in Suez Canal revenues helped contain the deterioration.
Oil-hedging contracts and long-term gas-supply agreements also reduced the impact of higher global energy prices.
Gross international reserves remained strong, reaching 119.00% of the IMF’s reserve adequacy metric at the end of June.
The Fund said continued reserve accumulation would strengthen Egypt’s ability to absorb future shocks.
Fiscal performance was described as robust.
By the end of March 2026, Egypt had exceeded both its primary-balance and tax-revenue targets, reflecting improved revenue mobilisation and expenditure control.
The primary surplus is projected at 4.80% of GDP in 2025/26 and is expected to increase to 5.00% in 2026/27.
The tax-to-GDP ratio is forecast to rise by 1.20 percentage points during the current financial year.
Gross financing needs also declined by 5.00% of GDP, but the IMF warned that debt-service and refinancing pressures remain elevated.
The Fund urged Egypt to maintain large primary surpluses, extend debt maturities, reduce reliance on short-term financing and broaden its investor base.
Structural reform remains the weakest part of the programme.
The IMF welcomed the adoption of a new State Ownership Policy and improvements in customs clearance and tax administration but said progress in reducing the government’s role in the economy had been slower than expected.
Egypt completed the Gabal El Zeit transaction and sold shares in selected publicly traded companies, generating about US$520.00 million in divestment proceeds.
However, the Fund said faster implementation of the asset-sale programme and stronger governance of state-owned enterprises would be necessary to create space for private investment.
Egypt’s latest IMF disbursement provides additional external financing and confirms that the government remains broadly on track with fiscal and monetary commitments.
But the programme’s success will ultimately depend on whether stability can survive prolonged regional conflict and whether authorities are prepared to accelerate politically difficult reforms that reduce debt risks and the state’s dominance of economic activity.
