Egypt’s economy is showing encouraging signs of recovery, according to the latest review report from the International Monetary Fund (IMF). The IMF highlighted that the government’s recent measures to restore macroeconomic stability are beginning to bear fruit, although inflation remains high.
The report noted that recent economic reforms, including the unification of the official and parallel exchange rates in March, have significantly improved Egypt’s economic outlook. The unification has led to a market-determined exchange rate, the resolution of the foreign exchange backlog at banks, and an increase in daily interbank global exchange turnover.
Antoinette Sayeh, Deputy Managing Director and Acting Chair at the IMF, commented, “The unification of the exchange rate and the associated monetary policy tightening have curbed speculation, attracted foreign inflows, and moderated price growth. With improved sentiment, private sector growth is expected to rebound.”
Sayeh emphasized the importance of a flexible exchange rate regime, continued tight monetary policy, and further fiscal consolidation. “A sustained shift to a flexible exchange rate regime and a liberalized foreign exchange system, along with robust fiscal measures and effective public investment monitoring, will support both internal and external economic balance.”
However, the IMF also acknowledged challenges to reform implementation due to geopolitical issues, such as the conflict in Gaza and tensions in the Red Sea. Sayeh warned, “Regional conflicts and uncertainties about trade disruptions in the Red Sea pose significant risks. Maintaining sound macroeconomic policies will be crucial for economic stability.”
The report also indicated that Egypt’s fiscal consolidation efforts are expected to reduce public debt and strengthen the country’s economic position. It stressed the need for improved domestic revenue mobilization and controlling fiscal risks, particularly in the energy sector, to ensure resources are available for essential spending on health and education.
Additionally, the IMF has adjusted several conditions of its $8 billion financial support package to Egypt, extending the timeline for implementing reforms and delaying the publication of annual fiscal audits until November.
The IMF’s review, published on August 26, underscores the progress made and outlines further steps needed to bolster Egypt’s economic stability and growth.
