An International Monetary Fund (IMF) delegation concluded its fifth review of the ongoing US$8 billion loan program with Egypt this week in Cairo with praise for the country’s economic performance. However, the fund noted that further steps toward privatization are required, stressing “the need to accelerate reforms aimed at reducing the state’s footprint in the economy.”
The current program began in 2022, as Egypt’s economy faltered in the economic tailwind caused by Russia’s invasion of Ukraine.
The agreement has been marked by friction between the IMF and Egyptian authorities, which have been cautious not to spark public anger while implementing recommended policies that undermined Egyptians’ purchasing power.
The praise Egypt received this time, however, appeared to reflect the degree of “laxity” shown by Egyptian officials and “leniency” on the part of the IMF Executive Board during the talks, a government source told Mada Masr on condition of anonymity.
Pressure on Egypt has diminished somewhat, according to a member of the House of Representatives’ Planning and Budget Committee who attributed the IMF’s softened stance to the country’s delivery on key loan requirements in ways that “exceeded expectations.”
Liberalizing the exchange rate and monetary tightening are at the forefront of these requirements, the source said. Moving away from a managed peg, the central bank has devalued the Egyptian pound multiple times against the dollar since 2022, allowing daily fluctuations in the exchange rate in recent months. The source also mentioned recent hikes in fuel and electricity prices. Delays in implementing scheduled price increases in both sectors, recommended under the IMF’s program to reduce expenditure on subsidies, had been a major stumbling block in completing past reviews.
The government has hiked fuel prices by as much as 87 and 207 percent in recent years.
During the same period, electricity rates increased by 40-65 percent. Natural gas bracket prices, which had remained unchanged for three years, were raised in September by 15-25 percent. Further hikes in fuel and electricity prices are expected in the upcoming fiscal year, the parliamentary source and a former Petroleum Ministry official told Mada Masr.
Inflation has slowed overall, and private investment has increased relative to public, the IMF said. Inflation peaked at around 30 percent in 2024 and has slowed by around 13 percent, according to recent figures.
The statement the IMF released on Tuesday to mark the end of its delegation’s visit to Cairo also praised a 35 percent increase in the share of private investment relative to public investment over fiscal year 2024/25 compared to FY 23/24.
Government investment has shrunk over the past three years from around $15 billion annually to less than $10 billion, the parliamentary source noted. The program has included diminishing expenditure on key public services like education and health.
Another reason the review went smoothly is the relative easing of the acute dollar shortage that had frozen imports and economic activity in previous years. “The government has reopened imports, but they remain constrained primarily by falling demand and purchasing power,” the source said.
Speaking to Mada Masr, a financial analyst at an investment firm echoed this view, pointing to around $35 billion in hot money inflows that have helped shield Egypt from a dollar gap. This, they said, has given the government some breathing room, especially with the program set to expire in October 2026. $4.8 billion are yet to be disbursed from the IMF’s $8 billion loan.
What remains unresolved in the program, the parliamentary source added, is the state’s role in the economy. Privatization has been a priority for the IMF in successive package reforms it has recommended since 2016.
The source said that the government has offered several explanations for its slow progress toward privatization, including a lack of satisfactory bids for state assets and the need to restructure some of them before they can be put up for sale.
In its statement, the IMF emphasized the need to accelerate reforms aimed at reducing the state’s footprint in the economy, primarily through the sale of state-owned assets in sectors the government had pledged to exit under its State Ownership Policy. This, the statement said, “will play a critical role in strengthening the ability of the private sector to better contribute to economic growth in Egypt.”
It also warned of Egypt’s widening budget deficit, driven by a surge in imports and a decline in fuel exports due to falling production levels. A drop in Suez Canal revenues also contributed to the deficit, the statement said, offsetting gains from tourism, remittances and non-oil exports.
It stressed the need to boost government revenues by broadening the tax base to bolster the state’s capacity for social and developmental spending, while welcoming recent government efforts to streamline tax and customs procedures to “increase efficiency and build confidence” — reforms it said are starting to yield positive results.
The praise came even as the IMF has yet to publish its fourth review’s staff report, which the Egyptian government requested be withheld.
The review was approved in March, unlocking a $1.2 billion disbursement. At the time, the IMF also approved Egypt’s request for a Resilience and Sustainability Facility agreement, allowing it to access an additional $1.3 billion in financing. The program terms are yet to be announced.
Meanwhile, Egypt faces over $6 billion in outstanding payments to the fund through the end of next year, including nearly $3.8 billion due in 2025, according to IMF data.
This issue falls under what the IMF describes as Egypt’s “deeper reforms” — measures that are expected to “unlock the country’s growth potential, create high-quality jobs for a growing population, and sustainably reduce its vulnerabilities and increase the economy’s resilience to shocks.”
Egypt began negotiating with the IMF for a $3 billion loan in late 2022, but the program stalled for several months. Talks resumed in late 2023 and concluded with the loan’s augmentation to $8 billion and the approval of both the first and second reviews in March 2024. That approval coincided with the fourth exchange rate adjustment in two years, which brought the dollar to LE50.