Egypt was forced to seek assistance from the IMF last year after being plagued with high inflation, shortages of foreign currency, and a sharp decline in Suez Canal revenue as a result of geopolitical tensions.
After a review mission to Egypt, the International Monetary Fund (IMF) said on Tuesday that the country is progressing towards macroeconomic stability and has been streamlining tax and customs procedures. However, it said that Egypt still had to widen its tax base. An IMF team visited the country earlier this month as part of its fifth review of the $8 billion financial support agreement signed in March 2024.
IMF Mission Chief for Egypt Vladkova Hollar, who was in charge of the team, said that substantial progress had been achieved towards macroeconomic stability. He also said that strengthened growth is expected, and so the IMF has updated its growth forecast for the financial year 2024-25 to 3.8%, as it anticipates a stronger-than-expected outturn in the first six months.
Egypt was forced to seek assistance from the IMF last year after being plagued with high inflation, shortages of foreign currency, and a sharp decline in Suez Canal revenue as a result of geopolitical tensions. Reuters reported last December that as part of the $8 billion financial aid, Cairo had agreed to increase its tax-to-revenue ratio by 2% of its GDP over the next two years and would also focus on reducing tax exemptions as opposed to increasing taxes.
In March 2025, the IMF approved the disbursement of $1.2 billion to Egypt following the completion of the fourth review of the aid programme. The board also approved Egypt’s request for an arrangement under the resilience and sustainability facility with access to about $1.3 billion.
The authorities’ request to recalculate their medium-term financial commitments was granted by the Executive Board. Specifically, it is anticipated that the primary balance surplus (not including divestment proceeds) will amount to 4% of GDP in the upcoming fiscal year. July 1 marks the start of the fiscal year 2025–2026.
Egypt’s central bank announced last week that the economy had it had grown by 4.3% in the October-December quarter and expected a 5.0% growth in January-March. Owing to this increase, the bank lowered its overnight interest rates by a less-than-expected 100 basis points.
The Monetary Policy Committee (MPC) also reduced the overnight deposit rate to 24% and the lending rate to 25%. This was the second time these rates were dropped this year after it had remained unchanged for over a year.
A year after Egypt signed a $8 billion financial support program with the IMF and secured a $24 billion real estate investment from the United Arab Emirates (UAE), annual headline inflation nearly halved to 12.8% in February, primarily as a result of a base impact. Inflation has been on the higher end ever since, reaching 13.9% in April.
The Bank issued a statement explaining that inflation will continue to decline at a restrained pace for the next two years, due to the strain from the fiscal consolidation measures which were implemented and planned this year, along with non-food inflation, which seems unlikely to go away.
Upon its fifth review, the IMF commended Egypt’s oversight and control over large public sector infrastructural projects, which had helped keep demand in check. It also said that the government was working on modernising and streamlining tax and customs procedures. The international lender added that, along with these reforms, which would undoubtedly yield positive results, it was necessary to increase domestic revenue. This can be done by widening the tax base and streamlining tax exemptions.
Egypt has been facing economic challenges and was in desperate need of IMF aid. However, having stuck to its end of the deal, the country has succeeded in turning the tide in a short period. Regardless of global economic pressures, Cairo can bring down inflation levels and increase its foreign reserves.
