Egypt Awaits IMF Board Approval for $2.7 Billion Tranche Amid Strong Growth Outlook

Egypt is awaiting approval from the International Monetary Fund’s (IMF) Executive Board for the fifth and sixth reviews of its Extended Fund Facility (EFF) program, which would unlock $2.4 billion. An additional $274 million is also pending for the Resilience and Sustainability Facility (RSF).

An IMF mission, led by Vladkova Hollar, announced a staff-level agreement with Egyptian authorities on the fifth and sixth reviews under the EFF and the first review under the RSF. The agreement followed the mission’s visit to Egypt from September 1 to 11, 2025.

In a statement issued Monday, the mission noted strong growth indicators for the Egyptian economy. Economic activity expanded to 4.4% in fiscal year 2024/2025, up from 2.4% in the prior year. The balance of payments also improved significantly, despite adverse external conditions. The private sector welcomed recent initiatives to enhance trade facilitation and streamline tax procedures.

The Central Bank of Egypt’s (CBE) tight monetary policy helped curb inflation, while robust tax revenue performance bolstered fiscal discipline, the mission added.

The IMF mission emphasized the need for Egypt’s fiscal policy to continue prioritizing debt reduction and ensuring social spending to safeguard vulnerable populations.

It also highlighted the importance of accelerating structural reforms, particularly those concerning the state’s role, the privatization program, and fostering a level playing field.

Egypt’s Economy Grows at Faster Pace

The IMF mission attributed Egypt’s economic growth indicators to strong performance in non-oil manufacturing, transport, finance, and tourism sectors.

Economic activity in Egypt accelerated further in the first quarter of fiscal year 2026/2025, reaching 5.3%.

The country’s balance of payments significantly improved despite negative external developments. Specifically, the current account deficit narrowed, with remittances from Egyptians working abroad and tourism revenues maintaining their strength. Non-oil exports also recorded strong growth.

Egypt’s external financial conditions improved considerably during 2025, with non-resident flows into government debt instruments increasing by approximately $30 billion. Foreign currency reserves reached $56.9 billion.

Primary Balance Surplus Improves

Fiscal performance remained robust, with the primary balance surplus reaching 3.5% of GDP in fiscal year 2024/2025. Tax revenues grew strongly, by 36% in FY 2024/2025 and 35% during July to November 2026/2025. This was driven by reforms aimed at broadening the tax base, improving voluntary tax compliance, and simplifying exemptions. Despite this, the tax-to-GDP ratio remained moderate by international standards in FY 2024/2025, at 12.2% of GDP.

Following the completion of the fifth and sixth reviews for Egypt, the IMF mission stated that sustained efforts are needed to close the tax-to-GDP gap and place the general government debt on a firm downward path, while ensuring continued targeted social spending.

CBE Maintains Careful Monetary Tightening Cycle

The Central Bank of Egypt maintained a tight monetary policy, adopting a cautious and gradual approach to ease inflation. This careful management of the monetary easing cycle is anticipated to continue, as monthly inflation readings suggest disinflationary pressures have not yet become entrenched.

Headline urban inflation in Egypt edged up to 12.3% year-on-year in November, after hitting a 40-month low in September. This was attributed to tight fiscal and monetary policies, the elimination of foreign currency shortages, and the fading impact of previous currency devaluation.

The mission noted that the widespread presence of state-owned banks in the financial system necessitates continued sound governance practices to maintain financial system integrity, strengthen market-based monetary policy transmission, and foster competition in the banking sector. To this end, the CBE should follow up on reviews initiated by independent external parties to ensure the application of best practices.

Egyptian authorities reaffirmed their commitment to maintaining fiscal discipline, reducing overall financing needs, and placing public sector debt on a sustainable downward trajectory.

In this regard, the government targets a primary balance surplus (including net acquisition of financial assets) of 4.8% of GDP during the current fiscal year and 5% of GDP in fiscal year 2026/2027.

Cabinet approval for a growth-supportive tax reform package is anticipated in January 2026, projected to increase tax revenues by approximately 1% of GDP in the next fiscal year.

While the financial position of the Egyptian General Petroleum Corporation (EGPC) still poses fiscal risks, recent measures have improved its finances, including achieving cost recovery on products covered by the retail fuel price indexation mechanism.

IMF Suggests Increasing Allocations for Takaful and Karama Program

The government reiterated its commitment to increasing allocations for the Takaful and Karama conditional cash transfer program, alongside human capital and other targeted social protection measures and programs. Given the importance of these programs, the IMF mission suggested considering further increases in financial allocations for these areas.

As macroeconomic stability begins to take hold in Egypt, the mission stated that a transition towards a more sustainable economic model is essential. This requires accelerating reforms that provide the private sector with space and opportunity to grow and thrive.

Continued Government Divestment and Enhanced Private Sector Role Essential

In this context, the Egyptian government and the IMF mission discussed the objectives of the national economic development vision. This vision prioritizes a reform program aimed at transforming Egypt’s growth model towards a more competitive, private-sector-led economy. The government has taken steps to improve the business environment, particularly concerning trade facilitation and simplifying tax procedures, with private sector participants acknowledging the results achieved in this area.

Looking ahead, the mission emphasized that efforts to reduce the state’s role must accelerate. This includes making tangible progress in the privatization program and redoubling efforts to achieve a level playing field, while avoiding the creation or expansion of activities by existing state-owned enterprises and other economic entities.

Reforms related to the Resilience and Sustainability Facility are proceeding as planned. Egyptian authorities have already implemented two key measures concerning climate change mitigation and climate finance, including a directive issued by the CBE requiring banks to monitor and report their exposure to companies that may face significant transition risks due to the adoption of a carbon border adjustment mechanism. Authorities are also making good progress in implementing the remaining reform measures.