“This crisis is not over… uncertainty remains extremely high,” said Miguel Eduardo Sánchez Martín, lead economist for Egypt, Djibouti, and Yemen at the World Bank in reference to the conflict in the region between the US, Israel, and Iran.
Martín was addressing a seminar organised by the Egyptian Centre for Economic Studies (ECES) last week titled “Readings in the Economic Impacts of the Conflict in the Middle East.”
Egypt has been affected like the rest of the region through commodity price shocks, trade and logistics disruptions, tighter financial conditions, and inflation, Martín said.
However, he noted that Egypt had entered this crisis from a position of relative strength because of its economic reform programme. Exchange-rate liberalisation, fiscal consolidation, and improvements to the business environment had begun to generate growth momentum. Economic growth accelerated from an average of 2.4 per cent in 2024 to 5.3 per cent during the first half of this year.
Martín said the government had responded decisively to the crisis through fiscal adjustments, energy reforms, and expanded social-protection programmes.
Allowing the exchange rate to absorb part of the shock was also an important decision, added Ahmed Galal, a former minister of finance and member of Egypt’s Specialised Council for Economic Development.
Had the Central Bank of Egypt (CBE) continued to defend a fixed exchange rate at all costs, the economy would have been in a much more difficult position, Galal told seminar participants.
What is important is that the government did not panic, he said, since when this happens governments frequently adopt abrupt and poorly designed policies.
Saad Sabbah, country head for Egypt for the International Finance Corporation, the World Bank’s private-sector arm, said he hoped Egypt would treat this crisis not simply as a challenge to be managed, but also as an opportunity.
He recommended “continued policy consistency” to reassure investors of the credibility of the reforms that have been implemented.
Beyond macroeconomic stability, Martín said competitiveness remains a key issue.
There is still a large state footprint in the economy, and some trade policies remain inconsistent with the objective of Egypt’s becoming a major exporting nation, he said.
Galal questioned how exports would be increased to reach $100 billion, the government’s target, while import substitution is promoted through highly protective trade policies.
Policies designed primarily to encourage production for the domestic market often work against export competitiveness, he pointed out.
If Egypt is to generate sufficient foreign exchange to service its external obligations, it must become a genuinely export-oriented economy, Galal said.
Improving Egypt’s competitiveness requires accelerating structural reforms, added Sabbah. He acknowledged that the government has made important progress in macroeconomic management, particularly on the monetary and fiscal fronts, but he said that these measures address the short and medium term only.
The longer-term agenda, according to Sabbah, depends on structural reforms that expand the role of the private sector, create a level playing field, strengthen regulatory clarity, and ensure the efficient allocation of resources.
This is not only about attracting foreign capital, he said, but also about “mobilising Egypt’s domestic private capital, much of which remains untapped.”
One area of great potential to attract investments is that of renewable energy.
Egypt imported around $19.5 billion worth of petroleum products last year, Sabbah noted. “Accelerating the transition toward renewable energy would strengthen energy security while improving long-term competitiveness,” he said.
Renewable energy generation has already attracted billions of dollars in investment, he noted, adding that the next stage requires reforms in transmission and distribution so that private capital can participate more effectively across the value chain.
Nonetheless, he stressed that this does not mean everything should be left to the private sector.
The World Bank fully recognises that the government will continue to play an important role in the economy, he said. However, it is more effective as a regulator and supervisor rather than as a direct market participant, he added, also acknowledging that there will remain areas where government involvement is essential.
According to Galal, preparing for future shocks and grasping opportunities requires building a stronger economy.
He questioned whether the state’s overall role in the economy is shrinking. Focusing solely on asset sales misses the broader issue, he pointed out.
Meanwhile, he added, while the government continues to play a large ownership role, it is not doing enough in its regulatory role. “Markets need effective oversight. Competition must be protected. Monopolistic behaviour must be addressed. Consumers must be protected,” he stressed.
Another major challenge facing the economy is public debt.
The current strategy relies largely on gradual adjustment and hopes that economic growth will eventually reduce the debt-to-GDP ratio. To Galal, that is not sufficient, however. When debt reaches the present scale, more fundamental reforms are needed, he said, suggesting that the budget should be unified.
Government resources should be consolidated into a single budget rather than fragmented across numerous economic authorities and special funds, he said.
Galal said average Egyptian annual GDP growth for the past 50 years has been around 4.5 per cent, which was not enough to meet Egypt’s needs.
A growth rates of seven or eight per cent is required to transform living standards and allow Egypt to join the ranks of rapidly developing economies such as South Korea, Malaysia, and Turkey, Galal stressed.
What is holding the economy back, he said, were outdated policies, outdated institutional arrangements, and an inefficient allocation of resources.
“Why are we building so many residential compounds while investing too little in productive manufacturing,” Galal questioned.
Another crucial area was the fact that whenever there is a crisis, government policy focuses on protecting the poor and overlooks the middle class, he said.
For years, Egypt’s middle class has absorbed repeated economic shocks with relatively little policy attention. Every crisis erodes its purchasing power further, he noted, adding that it is time for policymakers to pay much greater attention to this segment of society.
* A version of this article appears in print in the 9 July, 2026 edition of Al-Ahram Weekly.
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