Egypt’s economy is entering 2026 in good standing, several reports have confirmed.
“Egypt enters 2026 with a stronger commitment to foreign-exchange flexibility, tighter fiscal discipline, and a more credible policy mix following the 2024-2025 reset,” said a report by Cairo-based investment bank Zilla Capital titled Anticipating New Realities 2026.
On a similar note, investment bank Standard Chartered Global Research in its annual Global Focus said that Egypt enters the new year on a “noticeably stronger macroeconomic footing, supported by firm foreign-exchange inflows, improving external balances and tangible progress on structural reform.”
According to the Zilla Capital report, the adherence to a market-based foreign-exchange system has become more established, supported by rising banking sector net foreign assets. According to Central Bank of Egypt (CBE) figures, the net foreign assets (NFA) of the Egyptian banking sector increased to approximately $24 billion in November 2025. This compares with around $10 billion in February.
Another supportive factor, according to Zilla Capital, is continued engagement with the International Monetary Fund (IMF). Before 2025 closed the IMF said it had reached a staff-level agreement with Egypt on the fifth and sixth reviews under its Extended Fund Facility (EFF) arrangement.
Once approved by the IMF’s executive board, Egypt will receive a $2.5 billion disbursement. This sum “is set to reinforce foreign-exchange reserves and sustain the reform programme’s momentum,” said Standard Chartered.
The IMF delegation, in Cairo in December, said it had also reached a staff-level agreement on the first review of the Resilience and Sustainability Facility, another funding programme with Egypt. That approval would allow Egypt to receive an additional $1.3 billion.
The decline in inflation from its 2025 peak is another positive factor for improved economic standing, said Zilla Capital. Annual urban headline consumer price index (CPI) inflation, released on Saturday by the Central Agency for Public Mobilisation and Statistics (CAPMAS), recorded 12.3 per cent in December 2025, compared to around 24 per cent in December 2024.
During the same period core CPI inflation recorded 11.8 per cent compared to around 23 per cent earlier.
Standard Chartered projects inflation to drop to around 11 per cent by June 2026, helped by “moderating commodity prices, improved domestic supply conditions, and the fading impact of earlier currency adjustments.”
The quickest win in 2026 will be sustaining disinflation while preventing renewed foreign-exchange shortages that could re-price everything overnight, Mohamed Hafez, a researcher at Nottingham Trent University in the UK, told Al-Ahram Weekly.
That would be one way for Egyptians to feel that the economy has improved. For further improvement, the creation of jobs is crucial, as is tourism, Hafez said, one of the few sectors that can scale fast into jobs.
According to Egypt’s Ministry of Tourism, Egypt welcomed nearly 19 million tourists in 2024, a 21 per cent increase on the year before. Hafez stressed that such gains also have spillovers into small and medium-sized enterprises (SMEs), transport, food, and local supply chains.
Declining inflation would enable the CBE to continue its monetary policy easing, thus supporting business sentiment and reducing financing pressures on corporates, said Standard Chartered.
Since April 2025, the CBE has cut interest rates by 7.25 per cent. The overnight deposit and lending rates currently stand at 20 per cent and 21 per cent, respectively.
According to Zilla Capital, the monetary easing cycle is set to revive credit, private-sector hiring after years of suppressed activity, and capital expenditure by companies to buy, maintain, or improve their fixed assets such as equipment.
Furthermore, “an improving investment climate is helping stabilise the economy and restore predictability,” Mohammed Gad, CEO of Standard Chartered Egypt, said in a press release.
Along the same lines, Zilla Capital said “government reforms spanning taxation, customs, and the business environment have helped stabilise expectations.”
Another positive development, according to Zilla Capital, is the decline in Egypt’s total public debt from 95.9 per cent of GDP in 2022-2023 to 86.6 per cent projected for 2026-2027, on the back of “a gradual rebalancing from domestic towards external borrowing.”
However, it warned that “while this eases pressure on the local banking system, it also increases sensitivity to foreign-exchange stability, reinforcing the importance of disciplined exchange-rate management.”
“Keeping the exchange rate genuinely flexible, not flexible within a comfort zone as happened before, is non-negotiable,” Hafez told the Weekly.
The debt servicing is “a silent tax on everything else”, he pointed out.
He said that the Ministry of Finance’s new tax reforms are a key pillar in improving economic conditions: implement them properly and they become the lever for stronger revenues, more efficient debt-servicing, and a credible path to delivering on promises such as targeting a higher primary surplus in the current fiscal year while also maintaining large subsidy and social allocations.
Last year the Ministry of Finance introduced a first package of tax reforms aimed at easing financial pressures on taxpayers, broadening the tax base by simplifying tax procedures, and introducing incentives for small and medium enterprises. A second package is currently up for public dialogue. It focuses on the greater digitisation of the system and reducing direct human interaction in tax procedures.
Zilla Capital warned, however, that Egypt’s external financing dynamics remain under pressure in the near term, with the financing gap widening in the current and next fiscal year before easing.
“This reflects persistent foreign-exchange demand from debt-servicing, imports, and reform-related outflows during the adjustment phase,” it said. It noted that Gulf Cooperation Council (GCC) partners remain pivotal in narrowing Egypt’s external financing gap.
The investment bank expects Gulf inflows to cover between $8 to $10 billion in the annual gap up to 2026-2027.
Egypt also anticipates receiving four billion euros in macro-financial assistance in three instalments by 2027 from the EU, Foreign Minister Badr Abdelatty said on Thursday at a Cairo press conference alongside EU Foreign Policy Chief Kaja Kallas.
The funds are part of 7.4 billion euro funding package for Egypt announced in 2024 that includes five billion euros in concessional loans as well as investments and grants. Egypt received the first one billion euro tranche in January 2025.
Zilla Capital believes the composition of the financing is gradually improving. “Other prospective funding sources, primarily foreign direct investment (FDI), privatisation proceeds, and strategic investments, begin to outweigh reliance on external facilities, signaling a shift towards more sustainable, non-debt inflows,” it said.
According to Enterprise Press, a news website, the government plans to secure around $6 billion through the privatisation of key state-owned assets by October 2026 as well as tenders for 12 former ministry headquarters in Downtown Cairo.
Sale of land at Ras Banas on the Red Sea coast is also on the cards, it said.
Hafez believes that the chances of success in divesting stakes in government-owned companies this year are better than in 2023-2024, mainly because IMF-linked reform pressure is stronger and the divestment pipeline is active.
Nonetheless, he said, “success hinges on whether asset sales bring real governance and competitive-neutrality changes, not just minority stakes sold for short-term cash.”
Zilla Capital highlighted that while the financing gap is expected to peak in the near term, underscoring continued vulnerability, the outlook beyond 2026-2027 suggests a move towards stabilisation and greater self-reliance, provided reforms continue, assets are effectively monetised, and investor confidence is sustained under the IMF framework.
“Execution consistency now [is] the critical differentiator between structural recovery and another cyclical rebound,” it said.
* A version of this article appears in print in the 15 January, 2026 edition of Al-Ahram Weekly
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