After months of concern over the economic fallout of the Middle East conflict, there has recently been a string of positive news. The International Monetary Fund (IMF) has revised its growth forecast for Egypt upward to 4.6 per cent for the 2025-2026 fiscal year, a better than expected outcome in a year marked by the region’s widest conflict.
Foreign reserves hit $55 billion in June, the highest level in two years, boosted by stronger foreign-currency liquidity, portfolio investments worth $6.2 billion, and issuances in global markets of Samurai bonds.
Remittances surged 31 per cent year on year to $43.1 billion in the 11 months to May, largely from workers in the Gulf sending money home amid regional uncertainty. In the first quarter of 2026, tourism revenues rose to $4.2 billion from $3.8 billion in the same quarter of 2025, while Suez Canal receipts climbed to $1 billion compared to $800 million the year before.
The increased dollar inflows supported the pound, which has stabilised at around LE49-LE50 to the dollar. Inflation has eased for three consecutive months, encouraging the Central Bank of Egypt (CBE) to hold rates steady during its last three meetings.
This positive performance was not expected when the US-Iran war started amid fears of its effect on tourism, Suez Canal receipts, inflation, and investor sentiment.
“A significant part of the improvement was enabled by exceptional external inflows, whether through major investment deals, multilateral financing, or support from regional partners,” said economic expert and MP Mohamed Fouad.
Ali Metwally, an economic analyst at the UK-based IBIS Consultancy, said that “the figures manifest that there has been a clear economic stabilisation. Record reserves, stronger remittances, positive net foreign assets, and renewed portfolio inflows are not meaningless.”
He explained that the improved indicators show that the foreign-exchange market is functioning far better than during previous crises. Remittances are flowing back through official channels, and investors are more confident in Egypt’s ability to meet near term external obligations.
Adding an international dimension, Hani Genena, head of research at Al-Ahly Pharos, noted that international shifts triggered by US President Donald Trump’s trade and economic policies have had a positive impact on Egypt’s economy.
“When Washington imposed tariffs on Southeast Asian countries, investors began seeking alternative markets, with Egypt emerging as a destination for investment and export,” he said.
The increase in Chinese and Turkish interest in Egypt is evidence of this shift.
Another global development has been Europe’s sharp reduction in trade with Russia, with volumes plunging by two thirds since the outbreak of the Russia-Ukraine war. “In response, Europe is turning to North African suppliers such as Egypt, Algeria, and Morocco to replace Russian commodities,” he added.
However, these external factors alone would not have sustained growth without Egypt’s structural reforms. “What remains essential is to strengthen the role of reforms in driving the growth equation,” Genena stressed.
However, according to Fouad, while the inflows have provided the liquidity needed to restore confidence and stabilise the economy, they do not in themselves solve underlying challenges.
“Egypt has made real progress in stabilisation. Whether that becomes a lasting structural improvement remains an open question,” he said.
Metwally added that Egypt has moved from crisis stabilisation to early recovery, but not yet to structural transformation.
“The indicators I would watch are foreign direct investment [FDI] excluding mega-deals, non-oil exports, private-sector credit, private fixed investment, growth in manufacturing and tradable services, the absence of a parallel foreign-exchange market, and the pace of actual state divestment,” he said.
“The key distinction is that Egypt has improved its buffers, but it has not yet fully changed its growth model.”
Experts agree that the outlook remains positive, though highly sensitive to regional developments.
Fouad noted three main channels of vulnerability, with the first being energy. Egypt’s growing reliance on imports means any sustained rise in oil or liquefied natural gas (LNG) prices would affect inflation, the budget, and the balance of payments, he said.
The second is the Suez Canal, as continued instability delays the recovery of one of Egypt’s most vital sources of foreign currency. The third is investor confidence. Portfolio inflows can return quickly, but they can just as easily exit when geopolitical risks escalate.
Genena expects the Iran war to be short term. The US entered the war to secure strategic routes and trade corridors, giving Washington leverage in negotiations with powers such as China, he noted.
“The US and its allies will never opt for the continuation of a conflict that pushes oil prices beyond the $100 mark per barrel, since higher levels would fuel inflation in their already fragile economies, triggering political and social pressures that could affect elections,” he said.
He doubted oil prices would surge again due to de-escalation efforts. “In fact, I expect them to trend downwards, a shift that would benefit Egypt as one of the countries positioned to gain from lower oil costs,” he noted.
Mohamed Abu Basha, head of research at EFG Hermes, expects the fragile peace agreement between the US and Iran to hold, leading to a relative improvement in growth dynamics, controlled inflation, strong remittances, and a recovery in tourism.
“The key factor is that oil prices remain below the $80 mark as this would ensure a stable inflation environment and contained external financing needs. This will likely be the case as long as there is no major escalation in the regional conflict,” Abu Basha said.
Oil’s slide over the past month has raised hopes that motorists may soon be paying less at the pump, with Prime Minister Mustafa Madbouli hinting at a possible cut this quarter when Egypt’s Fuel Pricing Committee meets to review global prices and exchange rate shifts.
However, Abu Basha cautioned that any immediate reduction in prices is unlikely as the government is still covering fuel bought when crude was around $125 a barrel and the dollar stood at LE55.
External shifts are not the only concern. As the IMF programme moves towards its conclusion, questions are arising over the government’s credibility in adhering to the fund mandated reforms that are widely credited with underpinning the economy’s resilience.
On the macroeconomic side, the government’s commitment has become more credible. Exchange-rate flexibility has improved, fiscal discipline has strengthened, and the IMF programme remains broadly on track, according to Fouad.
Metwally added that the fact that the pound had weakened during the regional shock of the war and then recovered as conditions improved suggests that the foreign-exchange regime is more flexible than the old system of defending a fixed level until a crisis builds.
But the two experts noted that on private-sector-led growth and reducing the footprint of the state credibility is still mixed.
The recent transfer of a military-owned company into private management is symbolically important because it touches one of the most sensitive parts of the reform agenda, which is the economic role of state and military-linked entities, Metwally stated, adding that the market will look beyond the headlines.
A minority stake and the management of the military-affiliated Wataniya Fuel Stations have recently been transferred to TAQA Arabia, an energy and utility distribution company.
“Investors will ask if the ownership is really changing and if the management is independent. Are competitors operating under the same tax, procurement, land, licensing and financing rules? And will similar transactions follow,” Fouad said.
“The issue is not whether the state should play a role. Every successful economy has an active state. The issue is what role the state is playing.”
The news of recent privatisation deals and the temporary listing of some 20 state-owned companies on the stock exchange in preparation for selling stakes has been overshadowed by a new law giving the Future of Egypt Authority independent legal status and full financial, technical, and administrative autonomy, with a mandate to maximise Egypt’s economic power and support food, energy, water and national security.
“There appear to be three distinct functions for the agency: a strategic role related to food security, a development and enabling role, and an investment role. Each may be justified individually but combining them within one institution raises concerns about transparency, competition, and accountability,” Fouad said.
The expanded role of the Future of Egypt Authority suggests a continued centralised state role in managing strategic assets and development zones, Metwally added.
Egypt’s commitment to macroeconomic reforms is credible but still vulnerable. Its commitment to structural reforms is promising, but there is still work to be done. The next test is whether policy continues to favour flexibility and competition or returns to administrative control and state-led allocation.
Additional reporting by Safiya Mounir
* A version of this article appears in print in the 16 July, 2026 edition of Al-Ahram Weekly.
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