Life after the IMF: An opportunity to think outside the Fund

Earlier this month, the prime minister announced an economic program for Egypt under the banner of the “National Narrative for Economic Development,” which many news reports cast as a strategy for governing Egypt's after the current IMF program ends. The announcement coincided with a fierce critique of the Fund by former investment minister Mahmoud Mohieldin, who said “It is time we rebelled against this straitjacketed management.”

There is no quarrel with the need for a strategy to lift growth and employment and to spur investment and exports. Yet, one crucial question has gone largely unexamined: can Egypt truly shake free of the IMF’s grip once its program ends in November 2026?

I hope so, but I worry we may not.

Escaping the loan treadmill

For those who remember—and a memory serves economists well—Egypt signed an agreement with the IMF in 2016 that ran until 2019. It met many fiscal and monetary stabilization targets, albeit through significant austerity and currency flotations.

Despite this, in 2020, Egypt secured new financing from the Fund during the coronavirus pandemic, totaling nearly $8 billion. This consisted of an emergency facility of $2.77 billion in May 2020, followed directly by a 12‑month arrangement of $5.2 billion that June.

After the pandemic, Egypt was forced to sign yet another IMF agreement in 2022, this time for 46 months ending in November 2026, the date when “life after the IMF” is supposed to begin.

In short, we will have spent the better part of a decade reliant on the IMF. Such concentrated dependence on the institution’s loans suggests its prescriptions have fallen short of delivering the economic stability we seek. After each loan and the required “reforms,” we find ourselves in need of further assistance, whether from the IMF or from other international financiers.

To put it another way, the Fund’s policies did set Egypt on a path to recovery, but one underwritten by external borrowing (and domestic borrowing, too). The evidence for this is the striking worsening of the external debt volume over the very decade in which we implemented the IMF’s agenda.

Unsustainable policies

Rarely have IMF “reforms” yielded stability in macroeconomic indicators. Currency devaluations have reliably driven up inflation, and with it local interest rates. That combination has suppressed prospects for recovery and growth, and it has discouraged both domestic and foreign investment.

All this has left Egypt’s economy exposed to external shocks that, in turn, prompted the repeat IMF interventions just described. Those shocks have been many: the coronavirus pandemic, the war in Ukraine, and successive regional crises in Gaza, Sudan, and the Red Sea.

The Ras El‑Hekma deal—and what has recently circulated about a Red Sea ports deal—may herald a shift in how Egypt tackles chronic financing shortfalls: away from debt and towards Gulf investment, whether Emirati or Saudi and perhaps Qatari in due course. That may bring several benefits. But are such massive inflows sustainable?

It is not reasonable to expect annual deals worth $35 billion—or even $15 billion, for that matter.

No country, Egypt included, possesses an endless stock of assets to sell at that pace and on that scale. Also, Egypt needs more than short‑term foreign‑currency inflows. We need projects that generate growth and jobs so that, over the long term, we can finance ourselves.

What Mohieldin overlooked

Let us return briefly to Mahmoud Mohieldin’s remark that the government has spent recent years putting out fires, and that the time has come to pivot towards plans for growth and jobs.

His comments were notable. After all, he is a seasoned economist and statesperson, currently serving as a special envoy to the UN secretary‑general for financing the development agenda, and he served as an executive director at the IMF until last year.

The difficulty with his analysis is that it proceeds as if Egypt voluntarily chose to pursue IMF loans over the past decade and can now simply change course after those policies were shown wanting. In truth, IMF programs addressed crises with tools that created new crises.

The IMF may depart next year, but we will likely continue to live with the legacy of prolonged high interest rates that dampened investment, along with the inflationary impact of the Fund’s advice to float the currency both measurements eroded purchasing power and slowed activity across many sectors.

The post-IMF phase should—indeed, must—move beyond the Fund’s orthodoxies. This requires, above all, an industrial policy with a long-term focus on sectors capable of creating jobs and generating foreign currency.

The goal would be to compete in export markets, even as global trade recedes, or to substitute imports at home. Foremost among these sectors is manufacturing, where the government still lacks a clear and coherent vision.

This is preferable to simply hunting for investment in fixed assets that pull in capital to areas such as real estate—sectors that do not sustain employment, lack durability, and do little to increase our capacity to generate value added.

The bottom line is that the era of untrammeled free markets that fires the imagination of Mohieldin and others is over, or nearly so. The new reality more likely requires a fundamental rethink of the state’s economic role and of the policy instruments and institutions needed to make that role effective.