The International Monetary Fund (IMF) has reached a staff-level agreement with Egypt on the seventh review of its $8 billion loan program, as well as the second review of its Resilience and Sustainability Facility, paving the way for a final approval by the Fund’s executive board.
Once approved, the reviews would unlock about $1.5 billion under the Extended Fund Facility and another $136 million through the resilience program, bringing Egypt’s total disbursements under the two agreements to around $7.2 billion.
The latest review comes as the IMF continues to make reducing public debt and financing pressures a central priority for Egypt’s economic reform program, it said in a Monday statement.
Egypt signed the current IMF agreement in December 2022, initially worth $3 billion, but implementation slowed in 2023 as the government delayed some reforms, particularly around exchange-rate flexibility and state participation in the economy. The program regained momentum after the $35 billion Ras El-Hekma investment deal, prompting the IMF to expand the package to $8 billion in March 2024.
In its latest assessment, the Fund highlighted Egypt’s plan to reduce overall financing needs by about 10% of GDP over fiscal years 2025/26 and 2026/27 through measures including extending debt maturities and accelerating the government’s asset-sale program, also known as privatization.
While observers have warned of the sharp increase in Egypt’s public debt in recent years, the IMF said public debt has already begun moving downward, declining from 97.2% of GDP in fiscal year 2023/24 to 91.8% in 2024/25, following progress under the fifth and sixth reviews.
In its Monday statement, the Fund described Egypt’s economy as resilient despite the impact of regional conflict, pointing to government measures including higher fuel and electricity prices, energy-consumption cuts in state institutions, and a restructuring of public spending priorities.
Real GDP growth reached 5% in the third quarter of the fiscal year, bringing average growth during the first nine months to 5.2%, according to the IMF. However, inflation increased and the current-account deficit widened slightly due to higher import costs.
The IMF said the shift to a more flexible exchange-rate regime helped Egypt absorb the impact of foreign investors exiting domestic debt markets, while international reserves remained broadly stable through March 2026. A return of portfolio inflows, supported by the announcement of a US-Iran agreement, also helped offset much of the currency depreciation recorded after the outbreak of regional tensions.
Despite the improvement, the Fund warned that risks remain. Renewed global inflation pressures or a further escalation in regional conflicts could weigh on growth and external balances, while a potential ceasefire between the United States and Iran could lower global energy prices and improve investor confidence.
Earlier this month, Standard Chartered economist Bader Al Sarraf said Egypt could potentially seek a smaller IMF program after the current $8 billion facility ends, depending on the economic challenges the country faces.
On the fiscal front, the IMF said government performance remained strong, with tax revenues and the primary surplus exceeding targets through March, supported by stronger domestic revenue collection and adherence to spending limits set in the budget.
The Fund expects Egypt’s primary surplus to rise from 4.8% of GDP in fiscal year 2025/26 to 5% in 2026/27, saying maintaining this path is essential to placing debt on a sustainable downward trajectory, while continuing to contain fiscal risks, particularly those linked to government guarantees.
Tax reforms have also started showing results, with the IMF expecting tax revenues to increase by 1.2 percentage points as a share of GDP this year. The Fund said further reforms included in the 2026/27 budget and accompanying tax package would reinforce this trend, creating more fiscal space for higher social spending.
At the same time, the IMF urged Egypt to continue expanding targeted social protection programs as economic reforms proceed.
Inflation remains a challenge. The IMF expects annual urban inflation to reach 15.8% by the end of the month, up from 14.6% in May, exceeding pre-war projections due to base effects, higher energy prices, and the pass-through impact of the exchange-rate decline into consumer prices. The Fund said maintaining a tight monetary policy would be necessary to limit inflationary pressures.
The coming months will be the final window for the IMF to push for broader implementation of its reform agenda in Egypt, with the eighth and final review expected in November.
