While acknowledging that structural reforms are underway, the IMF warns that failure to implement critical policies and address fiscal vulnerabilities could undermine long-term stability and growth.
In December 2025, the fund completed the fifth and sixth reviews of the EFF programme and the first review under the Resilience and Sustainability Facility (RSF). The completion qualifies Egypt to receive approximately $2.3 billion.
Domestic risks and structural reform gaps
The IMF report highlighted significant domestic risks that could stall Egypt's economic recovery. Chief among them is the insufficient progress in addressing the country’s energy sector sustainability and large financing needs. The IMF stresses that a failure to take decisive action in these areas could further damage Egypt’s fiscal position and debt dynamics, undermining long-term growth prospects. The authorities are called to ramp up structural reforms to maintain the momentum for recovery.
Inflation continues to be a major concern, exacerbated by global commodity price volatility and administrative price adjustments, according to the report. The IMF pointed out that inflation expectations remain volatile and could spiral further if not managed carefully, with food and energy prices remaining key contributors to economic instability. Egypt's ability to stabilize inflation will be a crucial factor in ensuring sustainable economic recovery.
External vulnerabilities and global risks
On the external front, the report noted that Egypt faces heightened risks from global economic uncertainties. The IMF warned that disruptions in global trade, volatile commodity prices, and tighter financial conditions could worsen Egypt’s external balances, increase capital outflows, and raise borrowing costs. The external financing needs are expected to remain high, requiring Egypt to strengthen its economic resilience against global shocks.
Growth projections and reform outlook
Despite these risks, the IMF maintained a positive growth forecast for Egypt, projecting a 4.7 percent GDP growth rate for FY2025/2026. This growth is largely driven by stronger-than-expected performance in FY2024/2025. Over the medium term, the IMF expected the economy to accelerate to 5.7 percent by FY2027/2028 as structural reforms take effect. However, there is caution, as growth is projected to slow to 4.8 percent by FY202920/30 unless deeper, more fundamental reforms to the economic model are implemented.
The IMF acknowledged progress on Egypt's reform agenda, with 12 out of 14 structural benchmarks (SBs) being met. However, there is a significant gap in implementing key reforms, particularly in energy and fiscal sustainability. The IMF urges the Egyptian authorities to accelerate these efforts, particularly the full enactment of the tax reform package, which remains pending in parliament. Without the timely implementation of this package, fiscal targets for FY202520/26 could be jeopardized.
Fiscal strategy: Tax reforms and budget targets
As per the report, the government has set a primary surplus target of four percent of GDP for FY2025/2026, representing a slight tightening from the previous fiscal year. While this is a step in the right direction, the IMF notes that the country’s revenue projections are still not fully aligned with the programme’s tax targets. The authorities have proposed a tax package aimed at raising an additional 1 percent of GDP, but key elements, including the real estate tax and withholding tax on free zone sales, are still awaiting parliamentary approval.
The IMF emphasized that the timely passing of these measures is essential to ensure Egypt meets its fiscal goals. In the medium term, the government aims for a 5 percent primary surplus by FY2026/2027, which starts on 1 July 2026, supported by further tax reforms, including the removal of VAT exemptions and the introduction of a dividend tax on state-owned enterprise (SOE) profits. These reforms aim to increase Egypt's tax-to-GDP ratio by 2 percent over the two years from FY2024/2025 to FY2026/2027.
Public debt, financing needs, and divestment efforts
Despite a decline in Egypt's public debt-to-GDP ratio, from 97.2 percent in FY202320/24 to 91.8 percent in FY2024/2025, the report underscored the persistent challenge of high gross financing needs. Debt service remains a significant burden, consuming around 83 percent of tax revenues, leaving limited fiscal space for development spending. While Egypt's debt remains sustainable in the medium term, the IMF warns that reliance on short-term domestic debt exposes the country to substantial rollover risks and interest rate volatility.
On the divestment plan, the IMF report expressed concern over the slow pace of divestment efforts, a cornerstone of Egypt's strategy to reduce state involvement in non-strategic sectors. The authorities have made progress in raising $1.5 billion from divestments, but this is far from the original target of $6.5 billion.
Although the sale of land to Qatar (valued at $3.5 billion) will contribute to debt reduction, it does little to level the playing field between SOEs and the private sector. The IMF urges continued focus on accelerating divestment, strengthening the institutional framework, and fostering private sector participation.
In this respect, the report highlighted a significant challenge in reducing the state’s footprint in Egypt's economy, particularly the role of the military, explaining that despite efforts to remove tax exemptions for SOEs and amend competition laws, military involvement in various economic sectors continues to hinder fair competition. The report called for greater efforts to ensure a level playing field by accelerating the divestment of non-strategic SOEs and addressing military encroachment.
For the country’s financing needs, the IMF report highlighted that Egypt's external financing needs remain high, with $13 billion required for the current FY202520/26 and $4 billion for the upcoming FY2026/2027. The report also mentioned that Egypt has secured commitments for multilateral and bilateral financing, including $4.4 billion for FY2025/2026 and $2.5 billion for FY2026/2027. Divestment proceeds and market issuances are expected to cover the remainder of financing needs. However, the IMF warns that Egypt must continue to manage these external sources carefully to ensure long-term stability.
Programme extension and revised conditionality
The IMF has agreed to extend the EFF loan program to December 2026 to accommodate delays in previous reviews. The revised programme schedule includes elevating performance targets for March 2026 and introducing new structural benchmarks. This extension allows Egypt more time to implement the critical reforms outlined in the IMF’s recommendations, particularly those relevant to tax and debt management, as well as SOE governance.
The IMF’s latest review presents a mixed outlook for Egypt’s economy, underscoring both the risks and opportunities the country faces in FY2025/2026. While acknowledging that growth projections remain positive, the IMF's report stressed that authorities must accelerate structural reforms, particularly in energy sustainability, fiscal consolidation, and reducing state involvement in the economy. Moreover, the IMF affirmed in its report that it remains committed to supporting Egypt’s reform efforts, but warned that success will require decisive action to address both domestic vulnerabilities and external risks.
As per the report, the path to a stable, resilient economy depends on Egypt's ability to implement these reforms in a timely and effective manner, ensuring long-term fiscal health and growth. The IMF’s continued engagement and Egypt’s commitment to reform will be critical in navigating the challenges ahead.
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