GDP grew at 5.3 per cent in the first quarter of fiscal year 2025-2026, up from 3.5 per cent a year earlier. This is the strongest quarterly performance in over two years, according to the quarterly GDP note by the Ministry of Planning and International Cooperation.
The acceleration reflects the tangible impact of ongoing economic and structural reforms that are bolstering the real economy, crowding in private-sector activity, and steering the growth model towards tradable, high-productivity sectors such as manufacturing, tourism, and telecommunications, the note said.
Waleed Ramadan, public affairs strategist at Influence Public Affairs, described 2025 as a positive “reset year” for the Egyptian economy. After years of global shocks, high inflation, and pressures on the foreign-exchange market, the economy is now showing clear signs of stabilisation, recovery, and renewed confidence.
Blair cited “an improving perception of Egypt” by investors due to efforts by the Ministry of Finance and the Central Bank of Egypt (CBE). He lauded efforts by the Ministry of Finance to increase tax revenues at a time when the budget is constrained by large interest payments. The ministry has also advanced digitisation efforts, making its operations more efficient, he added.
Meanwhile, he said, the CBE’s effective management of the economy has helped strengthen foreign-exchange reserves and maintain a monetary policy that is addressing inflationary pressures and reducing interest rates.
To anchor expectations, the CBE initially pursued a tight monetary policy, then began a carefully sequenced easing cycle in 2025, cutting rates by a cumulative 6.25 per cent while keeping real rates positive, Ramadan noted.
On 20 November, a meeting of the CBE’s Monetary Policy Committee (MPC) left key interest rates unchanged, keeping the overnight deposit rate at 21 per cent, the overnight lending rate at 22 per cent, and the rate of main operations at 21.5 per cent. This is down from around 28 per cent in December 2024.
This combination of exchange-rate stability, disinflation, and gradual rate cuts has supported economic activity, improved investor sentiment, and contributed to the revival of the private sector, Ramadan said.
Net international reserves reached about $50.2 billion by the end of November, the highest level on record, reflecting stronger foreign-currency buffers. At the same time, business confidence has recovered: in November, the S&P Global Egypt Purchasing Managers Index (PMI) for the non-oil private sector rose to 51.1, signaling the strongest improvement in private-sector activity in five years, with higher output and new orders across manufacturing, construction, and services.
Economist Moataz Yeken described what the economy experienced this year as stabilisation and the prevention of further deterioration.
Several dynamics contributed to this, he said, pointing out that growth remained comparatively strong relative to global peers and inflation had cooled from the extreme peaks of 2023-2024.
Egypt’s annual urban consumer inflation registered 12.3 per cent in November, coming lower than expectations on the back of a month-on-month drop in food prices. This is a considerable drop from the 38 per cent recorded in September 2023.
Another improvement this year was the resilience of the external sector, said Yeken, particularly through tourism, Suez Canal activity recovering modestly, and an expansion in non-oil merchandise exports.
The banking system also managed to reinforce its net foreign assets position, supported by higher remittances and a more orderly foreign-exchange market, he said.
Remittances from Egyptians working abroad surged to $36.5 billion during 2024-2025, a 66.2 per cent growth from $21.9 billion a year earlier.
2025 also saw the Egyptian pound appreciate against the dollar from around LE49 in July to around LE47 in November. The disappearance of parallel-market distortions, along with the rise in reserves, reflects a healthier foreign-exchange market, Ramadan said.
Strategic deals such as the $35 billion investment in Ras Al-Hekma and the $29.7 billion at Alam Al-Roum delivered large scale foreign-currency inflows and supported the currency and banking sector liquidity, said Yeken in a note about Egyptʼs macroeconomic overview for the fourth quarter of 2024-2025 issued by Lynx Strategic Business Advisors.
Foreign demand for government debt instruments has also improved foreign-exchange availability. Investors have been attracted to Egyptian debt by its high yields. What made conditions more favourable was a weaker dollar globally and lower rates introduced by the US Federal Reserve.
IMF AGREEMENT: In the meantime, Egypt’s agreement with the International Monetary Fund (IMF) was on track this year.
An IMF mission was in Cairo during the first two weeks of December to carry out the combined fifth and six reviews of this agreement. The fifth review, originally scheduled for the summer, had been delayed, giving the authorities more time to meet the critical objectives of Egypt’s economic reform programme, particularly on the state’s role in the economy.
The IMF had good words to say about the economy following its fourth review in March 2025, confirming that Egypt is meeting its main macroeconomic targets. It released an additional $1.2 billion in support of reforms related to resilience and climate transition.
According to Yeken, the IMF programme has been deeply embedded in Egypt’s macroeconomic policy framework over the past few years. It has been essential not only as a source of financing but also as an anchor for policy discipline, particularly in monetary tightening, fiscal consolidation, and exchange-rate flexibility.
He noted that progress on the core stabilisation pillars has been significant. Monetary policy was tightened appropriately; the exchange rate became more reflective of market conditions; and fiscal reforms helped place the deficit on a more controlled path.
He believes the most challenging component remains the structural agenda, especially the State Ownership Policy and the gradual withdrawal of the state from activities where the private sector can operate more efficiently.
“The gap between policy design and execution is still visible, and this is where the next phase of reforms must accelerate,” Yeken stressed.
STATE OWNERSHIP: The State Ownership Policy Document, approved by the president in 2022, defines the government’s vision for the future role of the state in the economy, targeting greater private-sector contributions.
Ramadan believes there has been real progress in opening space for the private sector. The State Ownership Policy (SOP) positions the state primarily as regulator and strategic partner, not a dominant competitor, he said, adding that initiatives to improve the governance of state-owned enterprises, including transferring selected assets to the Sovereign Fund of Egypt, are steps in the right direction.
Acknowledging that the sale of state-owned assets remains sensitive due to concerns over valuation, employment, and national interests, nevertheless the next phase must focus on clear, time-bound implementation, ensuring a level playing field and facilitating private and small and medium enterprise (SMEs) investment.
Yeken said that state exits must be carried out more decisively, whether through the stock market or strategic sales. What matters is adherence to transparent processes, fair pricing mechanisms, and predictability in the timing and structure of transactions, he stressed, adding that “certainty is the currency investors value most”.
For fiscal year 2024-2025, projections for inflows from divestment have been reduced to $0.6 billion from $3 billion at the completion of the third IMF review, according to the fourth review report of the IMF. The shortfall has been reprogrammed to the final two fiscal years covered under the programme, the report said.
The IMF report, issued in July, said that the authorities should step up efforts to reduce the state’s footprint in the economy. It noted that the divestment plan of the State Ownership Policy had stalled in 2024 following initial activity in 2023. The authorities announced 35 companies for sale in early 2023, but they have only carried out partial divestment of nine, according to the IMF report.
Nonetheless, the government has remained committed to implementing the SOP. In September, a State Ownership Policy Index to track progress on the implementation of the policy was inaugurated.
Early in December Prime Minister Mustafa Madbouli announced that an updated SOP was being finalised and approved the structure of a new unit responsible for restructuring state-owned enterprises.
NO NEW IMF PROGRAMME: While renewing commitments to the SOP and to divesting stakes in state-owned enterprises, Madbouli announced in May that Egypt will not need a new programme from the IMF beyond its current arrangement.
According to Ramadan, the statement reflects a legitimate national aspiration. However, he said, achieving it will depend on sustaining reforms, diversifying exports, and strengthening domestic sources of financing.
IMF data still point to large financing needs and a sizeable external-debt stock, even as debt ratios are projected to improve. To realise the ambition of reduced reliance on IMF programmes, Egypt will need to continue using exceptional inflows to reduce debt, deepen export- and investment-led growth, and maintain transparency and predictability in policymaking, said Ramadan.
It is entirely within the government’s mandate to set the path they believe best serves the economy, added Yeken. In principle, he noted, the IMF does not engage unless a government requests support. It is not an imposed relationship.
Whether Egypt will need future IMF programmes depends on the sustainability of reforms, the resilience of external accounts, and the country’s ability to navigate global volatility without external buffers, he said.
“Ultimately, it is a sovereign decision based on evolving macroeconomic needs,” Yeken said.
According to Ramadan, Egypt’s Development Narrative, led by the Ministry of International Cooperation, complements the IMF framework by articulating national priorities such as infrastructure, social protection, green growth, and human development.
While the IMF provides macroeconomic anchors, the National Narrative for Economic Development and the national structural reform programme shape the country’s long-term vision, Ramadan said.
Egypt officially launched the National Narrative for Economic Development: Policies Supporting Growth and Employment in September, presenting a new framework that aligns the government’s programme with the Egypt Vision 2030 strategy.
It targets seven per cent real GDP growth by 2030, raising the share of private investments in total investments to 66 per cent, up from 60 per cent in the plan for the current fiscal year 2025-2026, and increasing the contribution of the private sector to GDP to 82 per cent, up from around 77 per cent in 2024-2025.
Blair stressed that Egypt needs a more open, competitive, and less bureaucratic operating environment for the private sector. He said that bureaucracy remains heavier than in many other countries. The government could take inspiration from the UAE’s pro-investment approach, which actively works to welcome and facilitate both local and foreign investment, he pointed out.
He noted that over the past 30 years, he has seen many cycles of growth and crisis, and a recurring cause of economic turmoil is poor decision-making by officials who may not be well suited to their roles. Strong policymaking depends on appointing the most capable people across ministries and ensuring coordinated government action that genuinely welcomes private-sector participation, both domestic and foreign, Blair stressed.
RECOVERED RESERVES: The foreign reserves, where most of the country’s foreign currency revenues pour in, followed an uninterrupted upward trajectory throughout the year. They reached $50.2 billion at the end of November, compared to $47 billion in January.
This was fed by improvements in most of the country’s foreign-currency resources, namely tourism, remittances, exports, and foreign direct investment (FDI). However, some observers undermined the hike by saying it was caused by a surge in the value of the gold component of reserves due to increases in the international prices of gold.
The value of the gold reserves at the CBE increased consistently through 2025, rising from $11.4 billion in January to $13.7 billion in May, $15.8 billion in September, and closing in November at $17.3 billion. The November figure was driven by a $707 million increase in gold reserves, which helped offset a $445 million dip in foreign-currency holdings, according to CBE figures.
“A meaningful slice of the November increase came from the revaluation of the gold component as prices rose, alongside continued portfolio inflows and Gulf Cooperation Council (GCC)-linked FDI, but what truly matters for external resilience is the liquid FX portion that can cover imports, debt service, and potential outflows,” Ali Metwally, an economic advisor at the UK-based IBIS Consultancy, said.
“In assessing vulnerability, investors look less at the total figure of the reserves and more at metrics like months of import cover in hard currency, the ratio of short-term external debt to usable reserves, and the central bank’s willingness to let the exchange rate move, which together tell you how much genuine firepower Egypt has rather than how big the gross number looks,” Metwally explained.
Based on average imports during 2024, Egypt’s reserves can cover six to seven months of imports. Moreover, as part of its IMF deal, Egypt is committed to both decrease its short-term loans in favour of long-term ones and to adopt a totally flexible exchange rate regime.
In June 2025, the last available figures, the share of short-term debt represents 19 per cent of overall debt, while the long-term makes up the balance. The free movement of the dollar-pound exchange rate proves, according to analysts, that the CBE does not intervene to support the currency, leaving it to supply and demand forces.
TOURISM BOOM: Even before the flock of tourists to visit the Grand Egyptian Museum (GEM), which officially opened in November, tourism figures were on the rise throughout the year.
While the exact official figures for tourism receipts for the year have not been revealed, the CBE report on “the external position of the Egyptian economy” note that tourism receipts recorded a 21 per cent increase in the second half of the fiscal year 2024-2025 ending in June.
Moreover, tourism expanded in the first quarter of 2025-2026 due to marketing campaigns, better service quality and infrastructure, and the use of digital transformation and AI to enhance visitor experiences.
Egypt welcomed 5.1 million tourists during the quarter, and arrivals are expected to rise further in coming quarters, particularly after the opening of the GEM.
The US ratings agency Fitch expects the overall revenues during the year to be around $17.1 billion, compared to $14 billion last year. Furthermore, it projects continued recovery and steady growth for Egypt’s tourism: about 18.6 million visitors in 2026 and a multi-year rise toward roughly 20 to 21 million by the late 2030s.
BUOYANT EXPORTS: Exports saw a particularly good year in 2025. Egypt’s non-oil exports surged 19 per cent year-on-year during the period from January to October, reaching $40.6 billion, according to Minister of Investment and Foreign Trade Hassan Al-Khatib.
In 2024, total exports for the full year came in at $45.3 billion.
“Stronger performance in exports of some industrial sectors like fertilisers, chemicals, food processing, and building materials, some new market penetration in Africa and the Gulf, and a more competitive exchange rate, are some of the reasons behind the 2025 good exports figures,” said Metwally.
He said that some of these drivers are structural like capacity expansions in fertilisers and food industries, while others, such as favourable price cycles or temporary demand spikes, are less durable, so sustaining momentum in 2026 will require continued logistics upgrades, trade finance, and firm-level support rather than relying purely on the favourable exchange rate.
The country has also introduced a new phase of its export support scheme during the year.
GIGANTIC LNG IMPORTS: Fuel imports skyrocketed this year, fed by the high liquified natural gas (LNG) imports, which jumped 188 per cent year-on-year in the first 11 months of 2025 to 7.8 million tons, according to the CNN Business.
The last couple of years saw gas production drop significantly due to technical problems with the Zohr Field, together with foreign partners being reluctant to invest in or operate the fields due to accumulating arrears.
The exceptionally hot summers since 2023 have pushed the demand for electricity, generated by natural gas-fuelled power stations, to record levels, leading to paralysing blackouts in 2023 and 2024.
In summer 2025, to hedge against power cut episodes, the government secured the supply of energy by expanding imports of LNG. Things might be better next year, with the government expanding exploration and production activities, regularly repaying arrears, and investors like the Italian company Eni committing investments of $8 billion in new exploration agreements until 2030.
“The jump in LNG imports in 2025 is clearly not sustainable; using gas price hedging and pushing domestic exploration can smooth the fiscal and external hit, but in the short to medium term Egypt will still depend on imported gas as long as regional supply risks and domestic production constraints persist,” noted Metwally.
REMITTANCES: The year’s most pleasant surprise was the jump in remittances.
These surged by 30.9 per cent year-on-year in September compared to the same month in 2024. September marked the 19th consecutive month of year-on-year growth in remittances. The October and November figures are yet to be released.
After the floatation of the pound in March 2024, remittance flows moved back into formal channels with the disappearance of the parallel market that had redirected expatriates’ funds to unofficial routes.
In the first nine months of 2025, remittances climbed 45.1 per cent year-on-year to a record $30.2 billion. This surge reflects not only the collapse of the parallel market but also rising inflation, which has led many Egyptians abroad to increase the money they send home to help families cover higher living costs.
SUEZ CANAL RECOVERS: The Suez Canal, which lost billions after October 2023 due to geopolitical risks and Red Sea disruptions, is beginning to recover some of these losses.
The Canal Authority (SCA) reported a 14.2 per cent year-on-year increase in revenues between July and October and said in November that calmer Red Sea conditions following a Gaza ceasefire have helped boost transits.
Reuters noted that the Houthi group in Yemen carried out more than 100 attacks on ships in the Red Sea, the Gulf of Aden, and the Bab Al-Mandeb Strait in 2023 and 2024, prompting many shippers to divert to alternative routes.
In October, 229 ships resumed passage through the Canal, the highest monthly total since the regional crisis began, with traffic volumes and tonnage showing steady improvement in recent months, it reported.
SCA head Osama Rabie invited global carriers to run trial voyages through the waterway. French line CMA CGM has already restarted crossings with two large container ships, and other operators such as MSC, Evergreen, and COSCO have said they are considering increasing Canal transits as conditions stabilise.
The IMF projects that Suez Canal revenues will rebound to $6.3 billion in fiscal year 2025-1026 and climb to $8.2 billion in 2026-2027.
Rabie said that the SCA has sought to lessen the impact of Red Sea disruptions by diversifying income and expanding maritime and logistics offerings such as ship repair, crew changes, pollution control and marine waste removal and by promoting the localisation of marine industries and export growth.
INVESTMENT: The year saw a flow of Chinese and Turkish investments in a wide range of industries starting with textiles, automobiles, tyres, and electronics.
Egypt also continues to attract FDI into energy (particularly renewables), logistics, ICT services, and port and transport concessions.
While the number of deals is high, there was no big-ticket deal until the announcement of the Ras Al-Hekma-style $29.7 billion investment by Qatar’s Diar Real Estate Investment Company to develop more than 20 million square metres of coastal land in the Semla and Alam Al-Roum areas of the Matrouh governorate.
Under the agreement, Diar will pay $3.5 billion for the land and commit $26.2 billion in in-kind investment to construct the project. The transaction forms part of a wider $7.5 billion investment pledge from Doha announced in 2025.
The US ratings agency Moody’s says the agreement strengthens Egypt’s appeal to Gulf investors and could prompt further FDI from Saudi Arabia and Kuwait. These inflows are expected to stabilise the exchange rate, lift investor confidence, and contribute to lower, more sustainable inflation, outcomes that should reduce government borrowing costs and improve debt affordability.
“Qatar’s investment in Alam Al-Roum, following the UAE’s Ras Al-Hekma deal, marks a decisive shift in how Egypt mobilises foreign capital under FX stress. These transactions are best understood not as conventional land sales, but as sovereign asset monetisation strategies designed to convert illiquid public assets into immediate foreign currency, while retaining a share of long-term value through profit-sharing or equity stakes,” said Racha Helwa, a senior economist and former advisor to Egypt’s Minister of Investment.
She said that the economic logic is clear. “At a moment of acute FX scarcity and elevated refinancing risks, such deals deliver rapid liquidity, support reserve accumulation, and ease pressure on the balance of payments.”
However, such deals are always accompanied by local reservations on the grounds that they could be seen as selling the country’s land to bridge a temporary problem. Strategically, Metwally said, “these projects can be positive if they bring credible long-term capital, infrastructure and tourism capacity, but public sentiment will remain wary.”
Helwa noted that public concerns about selling land to foreigners were neither trivial nor misplaced as land is a strategic and emotionally charged national asset. Both experts agreed that social acceptance depends on transparency on pricing, clear limits on ownership, clarity on the use of proceeds, and evidence that these projects generate broad-based economic value rather than enclave developments.
DEBT OUTLOOK: Despite the recent economic stabilisation, a December report by Moody’s highlighted a lingering challenge for Egypt: debt-servicing costs remain stubbornly high due to a rise in “real” borrowing costs.
The report noted that while nominal treasury bill yields dipped from 31 per cent in 2024 to 27 per cent in 2025, inflation plunged much faster, dropping from 24 per cent to 12.3 per cent, which means that the government’s effective cost of borrowing is not declining at the same pace of the inflation drop, intensifying pressure on the budget.
Moody’s report said that Egypt currently ranks among the top three countries that it rates for interest burdens, with debt-service payments consuming over 63 per cent of government revenue in fiscal year 2024-2025. However, it offered a silver lining for the medium term: as interest rates continue to ease, this heavy burden is projected to lighten significantly, with the interest-to-revenue ratio expected to cool to 40 per cent by 2030.
“Egypt’s public debt challenge is less about headline debt ratios and more about debt-servicing capacity, particularly the exceptionally high interest-to-revenue ratio driven by elevated domestic borrowing costs,” Helwa said.
Egypt has adopted a strategy to deal with this. She pointed out that the country has delivered large and sustained primary surpluses, supported by subsidy rationalisations and stronger revenue collection.
In a press conference in August, Finance Minister Ahmed Kouchouk spoke of the government’s success in achieving a primary surplus of 3.6 per cent in 2024-2025, which allowed increased spending on sectors that affect citizens’ lives, noting an allocation of LE642 billion for subsidies, grants, and social benefits, a year-on-year rise of 12 per cent, including LE165.4 billion for food subsidy support, and LE43.2 billion for the Takaful and Karama welfare programmes.
Another policy that contributes to reforming the debt structure, according to Helwa, is Egypt’s pursuit of debt diversification and maturity extensions, including greater reliance on medium-term instruments and sukuk (Islamic bonds) issuance.
The Finance Ministry’s strategy is to diversify its debt issuances and depend more on debt in local currency in efforts to decrease the cost and burden associated with servicing the public debt. The country issued its first local sukuk using 74 km² of land in Ras Shukeir overlooking the Red Sea as collateral and thus providing financing to meet state budget needs on favourable terms.
During November and until mid-December, the Ministry of Finance sold three local issuances totalling LE10 billion of three-year sukuks as part of its plan to issue LE50 billion worth of Islamic bonds until the end of the fiscal year ending in June 2026.
This comes in addition to the October $1.5 billion sovereign international sukuk issuance, its third-ever and the first of the current fiscal year, following a $1 billion sovereign sukuk issuance in June that was fully subscribed by the Kuwait Finance House.
Helwa highlighted another scheme to contain the high debt: Egypt has used exceptional FX inflows, notably from large FDI and asset transactions, to reduce refinancing pressures and partially retire high-cost debt.
“These measures have produced measurable, but still fragile, improvements. Debt-to-GDP ratios have stabilised and begun to decline modestly, risk premiums have narrowed, and external liquidity pressures have eased. However, interest payments still absorb an unusually large share of government revenues, leaving public finances highly sensitive to growth shocks, interest rate volatility, and reform slippage,” she concluded.
Egypt’s total external debt reached $161.2 billion by the end of the fiscal year 2024-2025, recording a 5.5 per cent year-on-year increase, according to the recent CBE external position report for the fiscal year.
However, “the external debt remained within manageable limits, with a stock-to-GDP ratio of 44.2 per cent and with a favourable structure of 80.8 per cent as long-term debt,” the report read.
TAX REFORMS: The Ministry of Finance has launched a broad, two-phase tax reform.
Its goal is not to raise rates but to widen the tax base and boost compliance, especially given the large informal sector. The first phase focuses on dispute resolution, voluntary disclosure, and compliance incentives, delivering quick revenue gains and enrolling hundreds of thousands of new taxpayers.
“This demonstrates that informality in Egypt is driven as much by administrative complexity and distrust as by the tax rates themselves,” according to Helwa.
The plan’s second phase moves beyond just revenue collection to focus on institutional overhaul and efficiency. This modernisation will simplify tax rules for small enterprises, speed up value-added tax (VAT) refunds, segment taxpayers for better service, and achieve full digital integration through mandatory e-invoicing and comprehensive data management.
“The emphasis on facilitation, rewarding compliant taxpayers, and reducing administrative friction, is critical for sustaining formalisation,” Helwa said.
Metwally said the two-phase tax reforms can, if implemented well, lift tax revenue by perhaps 1-1.5 per cent of GDP over the next few years, but their real value lies in building a fairer, more predictable system that supports formalisation and medium-term consolidation rather than just chasing short-term cash.
From a macroeconomic perspective, according to Helwa, this matters more than any single FDI deal. “Sustainable debt reduction and economic stability ultimately depend on domestic revenue capacity, not asset sales. In that sense, tax reform is the quiet but essential anchor of Egypt’s broader adjustment strategy.”
LOOKING AHEAD: Ramadan said 2026 is widely expected to mark a transition from stabilisation to policy normalisation, building on the gains achieved during 2025.
Egypt is expected to maintain its flexible exchange-rate regime, allowing price formation to reflect market dynamics while supporting predictability and confidence among investors and businesses.
Inflation is projected to continue its downward trend throughout 2026, he said, benefiting from disciplined monetary policy, easing supply-side pressures, and more anchored expectations.
According to economic analysis, inflation is expected to stabilise at around nine per cent by the end of 2026, broadly in line with the CBE official target range of five to nine per cent, reinforcing price stability and purchasing power.
On the exchange-rate front, under continued policy discipline and orderly market conditions, the Egyptian pound is expected to follow a gradual and transparent adjustment path, rather than abrupt movements, Ramadan said.
He expects the exchange rate to average around LE49.5 per US dollar by the end of 2026, reflecting inflation differentials and real economic adjustments, while remaining consistent with external stability.
These dynamics suggest that 2026 could consolidate Egypt’s shift toward a more predictable, balanced, and resilient macroeconomic environment, Ramadan said, strengthening confidence, supporting private-sector planning, and laying firmer foundations for sustainable growth in the medium term.
Going forward, Yeken stressed that priority should be given to a comprehensive SME empowerment strategy that links small producers to national and global value chains. Beyond financing, SMEs need technical upgrading, export facilitation, and entry into supplier programmes for major industries, he highlighted.
Egypt should also pivot towards more diversified and technology-intensive FDI, Yeken said, adding that investment attraction must be aligned with knowledge transfer, local research and development capabilities, and vocational skills development.
“Strengthening technical education and supporting applied research will be crucial for moving the economy up the value ladder,” he said.
* A version of this article appears in print in the 25 December, 2025 edition of Al-Ahram Weekly
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