The International Monetary Fund (IMF) Executive Board approved the fifth and sixth reviews of Egypt’s Extended Fund Facility (EFF) programme and the first review under the Resilience and Sustainability Facility (RSF) on 25 February, unlocking approximately $2.3 billion in fresh financing.
The decision allows Egypt to immediately draw about $2 billion under the EFF and $273 million under the RSF, bringing total disbursements under both arrangements to roughly $5.2 billion. Egypt’s 46-month EFF programme, approved in December 2022, runs until 15 December 2026.
The initial phase of the reform programme focused on crisis management and stabilisation, while the current phase centres on structural transformation and debt sustainability. The IMF’s extension of the programme to the end of 2026 reflects the recognition that structural change requires time but also signals that reform implementation must accelerate.
Following the decision, the IMF said that Egypt’s macroeconomic conditions have improved. Real GDP growth accelerated to 4.4 per cent in fiscal year 2024-2025, while annual inflation declined to 11.9 per cent in January 2026 from a peak of 38 per cent in September 2023, supported by tight monetary and fiscal policies and exchange rate flexibility.
The current account deficit narrowed to 4.2 per cent of GDP, reflecting strong remittances and tourism revenues. The IMF cited improved investor sentiment, noting successful external bond issuances, rising foreign direct investment (FDI) inflows, and record non-resident purchases of domestic debt.
Gross international reserves rose from $54.9 billion in December 2024 to about $59.2 billion by December 2025, supported by the stronger external position and exchange rate flexibility.
Fiscal performance improved on higher tax revenues and lower public investment, although the primary balance fell short of programme targets due to delays in planned divestment proceeds.
The IMF said that implementation of the RSF reforms, which support decarbonisation, climate resilience, and environmental risk management, is progressing well. The authorities have published a renewable energy timetable and required the banks to monitor and disclose exposure to climate-transition risks.
However, the IMF cautioned that progress on structural reform has been uneven. Efforts to reduce the state’s economic footprint, particularly through asset divestment, have advanced more slowly than envisaged, while high public debt and elevated gross financing needs continue to weigh on medium-term growth prospects.
Looking ahead, it stressed that Egypt’s priority remains transitioning towards a sustainable, private sector-led growth model. Key priorities include maintaining exchange rate flexibility, completing disinflation, strengthening domestic revenue mobilisation, and implementing a medium-term debt management strategy while safeguarding social spending.
The IMF also pointed to downside risks, including heightened regional geopolitical tensions, tighter global financial conditions, and potential delays in energy and structural reforms.
On the upside, stronger Suez Canal activity, a rebound in hydrocarbon production, and the faster implementation of Gulf-backed mega-projects could bolster growth and external balances, it said.
IMF Deputy Managing Director Nigel Clarke said in a statement following the approval that Egypt’s stabilisation measures are yielding results, with growth recovering, inflation declining, and the external position strengthening.
He emphasised that deeper reforms, particularly in the divestment of non-strategic assets and debt management, are essential to crowd in private investment and secure durable growth.
He also underscored the need to broaden the tax base, reduce VAT exemptions, enhance compliance, and implement recently approved tax measures. He called for greater fiscal transparency, the tighter oversight of off-budget entities, the continued development of the domestic debt market, and stronger governance and risk management at the state-owned banks.
Maintaining a flexible exchange-rate regime remains critical to preventing renewed external imbalances, he added, noting that foreign-exchange intervention by the Central Bank of Egypt (CBE) should be limited to disorderly market conditions.
The IMF concluded that sustained reform momentum, particularly in reducing the state’s footprint and advancing climate-related reforms, will be key to fostering resilient, export-led growth over the medium term.
Economic expert Mustafa Badra said monetary tightening continues to gradually curb inflation, stressing that a cautious stance remains key to containing price pressures.
He projected that inflation could ease to around 10 per cent in the first quarter of 2026, with a further one to two per cent decline possible depending on the CBE’s policy approach.
He added that strengthening investment capacity requires well-calibrated incentives without compromising interest rate stability and lauding ongoing efforts to attract fresh capital inflows through state asset offerings and private sector investment.
The IMF approval is closely linked to recent balance of payments (BoP) data. According to the CBE, the current account deficit narrowed sharply, supported by strong remittances, tourism receipts, and Suez Canal revenues.
A narrower current account deficit indicates foreign-currency inflows are keeping pace with outflows, supporting reserve accumulation and external stability. The IMF cited strengthened external buffers, including rising reserves, as supporting its approval.
Remittances from Egyptians abroad rose significantly, alongside tourism and Suez Canal revenues, helping cushion the external sector and ease pressure on the balance of payments.
While the overall BoP remained in deficit at $1.6 billion, compared with about $1 billion last year, the IMF highlighted improving market confidence, reflected in portfolio inflows and successful debt issuances.
These capital flows help offset deficits and support BoP stability.
The $2.3 billion IMF financing strengthens the country’s foreign-exchange buffers, helping Egypt meet external obligations and stabilise currency markets. The IMF endorsement may also further support capital flows, tourism, and private-sector engagement.
Although the overall BoP remains in deficit, the narrowing current account suggests structural external pressures are easing, a key factor in programme review approvals.
* A version of this article appears in print in the 5 March, 2026 edition of Al-Ahram Weekly
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