IMF headquarters. Photo: AFP
Once approved, Egypt will receive about $1.5 billion under the EFF and about $136 million under the RSF, bringing total disbursements under both programmes to approximately $7.2 billion out of $9.3 billion.
Egypt has still the current seventh review and the final review under the EFF programme that will end on December.
The agreement follows discussions between an IMF mission led by Ivanna Vladkova Hollar’s successor, Mati, and Egyptian authorities during meetings held in Cairo from 11 to 21 May and virtually thereafter.
The IMF said Egypt’s economy had remained resilient despite the regional shock caused by the war in the Middle East, crediting the government’s policy measures, including fuel and electricity price hikes, energy consumption rationalisation across state entities, spending reprioritisation, and increased social support for vulnerable groups.
Real GDP growth accelerated to 5 percent in the third quarter of the current fiscal year, lifting growth for the first nine months to 5.2 percent, the IMF said. However, headline inflation increased while the current account deficit widened slightly due to higher import costs.
The Fund noted that Egypt’s flexible exchange rate helped absorb external shocks following portfolio outflows during the conflict, while gross international reserves remained broadly stable at the end of March 2026.
Portfolio inflows have since resumed, supported by the announcement of the US-Iran agreement, reversing most of the pound’s depreciation recorded after the conflict began.
Despite the improved outlook, the IMF warned that downside risks remain, including renewed geopolitical tensions and global inflationary pressures that could weigh on growth, tighten financial conditions, and strain Egypt’s external position. It added that the recent US-Iran ceasefire could ease pressure on global energy prices, improve investor sentiment, and support additional capital inflows.
On the fiscal front, the IMF said Egypt exceeded its primary balance and tax revenue targets by the end of March, driven by stronger domestic revenue collection and expenditure discipline. The primary surplus is projected to rise from 4.8 percent of GDP in FY2025/26 to 5 percent in FY2026/27, supporting efforts to place public debt on a sustainable downward path.
The Fund also highlighted progress in domestic revenue mobilisation through tax administration reforms and a broader tax base, with the tax-to-GDP ratio expected to increase by 1.2 percentage points this fiscal year. It said the FY2026/27 budget and accompanying tax package should reinforce these gains while creating additional fiscal space for social spending.
Persistant concerns
The IMF stressed that strengthening public debt management remains a priority, welcoming the government’s plan to reduce gross financing needs by around 10 percent of GDP over FY2025/26 and FY2026/27 through longer debt maturities, liability management operations, and proceeds from state asset sales.
Inflation, however, remains a concern. Urban headline inflation stood at 14.6 percent in May and is now projected to reach 15.8 percent by the end of the fiscal year, reflecting higher energy prices, exchange rate pass-through, and base effects. The IMF said maintaining a tight monetary policy will be necessary to prevent renewed inflationary pressures.
The Fund reiterated that exchange rate flexibility should continue serving as Egypt’s primary buffer against external shocks.
It also called for faster implementation of structural reforms aimed at improving the business climate, strengthening governance, enhancing transparency, and reducing the state’s role in the economy. The IMF said accelerating the government’s divestment programme under the recently published State Ownership Policy would help level the playing field, stimulate private sector-led growth, create jobs, and expand economic opportunities.
Under the RSF programme, the IMF said Egypt has continued advancing climate-related reforms, including integrating climate considerations into public investment planning, strengthening climate risk analysis in fiscal policy, mobilising private climate finance, and improving water resource management and emissions reduction frameworks.
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