Thumbs up from the IMF

The Egyptian economy was commended during this year's International Monetary Fund/World Bank Spring Meetings

Egypt's GDP growth rate for the current fiscal year is expected to reach 3.8 per cent, up from 2.4 per cent in 2024, according to forecasts by the International Monetary Fund (IMF).

These expectations reflect the tangible results of the structural reforms implemented by the government, which focus on improving the investment environment, supporting the private sector, and enhancing the economy's resilience in the face of shocks, Minister of Planning and International Cooperation Rania Al-Mashat was quoted as saying on the ministry's website.

She added that the government aims to achieve comprehensive and sustainable economic growth that will contribute to creating real job opportunities and improving living standards and requires the continuation and expansion of the scope of reforms.

Jihad Azour, director of the Middle East and Central Asia Department at the IMF, said growth is expected to keep improving in 2026 to reach 4.3 per cent. Speaking at a press briefing during the IMF/World Bank Spring Meetings last week, Azour said the IMF forecast inflation to average 19.7 per cent in 2025 and to drop to 12 per cent in 2026.

These positive developments reflect the implementation of the reform programme supported by the IMF, Azour said.

The government's management of the economy in the face of multiple external shocks, and its commitment to implementing economic reforms, was praised by Nigel Clarke, deputy managing director of the IMF, during his meeting with Central Bank of Egypt (CBE) Governor Hassan Abdallah on the sidelines of the meetings.

Egypt has had an Extended Fund Facility (EFF) arrangement with the IMF since December 2022. The agreement was partly stalled until March 2024, when the government renewed its commitments, and the IMF augmented the loan to $8 billion.

In March this year, the IMF further approved $1.3 billion in funding for Egypt under the Resilience and Sustainability Facility (RSF). The latter is intended to help Egypt deal with climate issues as well as address some of the external shocks, in particular the decline in revenues from the Suez Canal, Azour said.

Egypt is due for the fifth review of the loan in June, IMF head of mission in Egypt Ivanna Vladkova Hollar was quoted as saying in March. This year's Spring Meetings saw the participation of Al-Mashat, Minister of Finance Ahmed Kouchouk, and Abdallah.

One of the key elements of the IMF's fifth review of Egypt's loan will be the government's efforts to sell stakes in state-owned enterprises.

"We look forward to the next review to see an acceleration of the divestment strategy that is one of the key priorities because of its critical impact on sustaining growth in Egypt, providing opportunities to the private sector," Azour said.

Growing the economy and giving greater weight to the private sector are key pillars of the agreement. Azour said the divestment strategy would allow more investment to flow into the Egyptian economy, give more space to the private sector, and give the Egyptian people better opportunities.

It would also help in the efforts that Egypt is pursuing in reducing its debt.

Azour highlighted the fact that one of the pillars of Egypt's agreement with the IMF is to address the debt issue by improving the primary surplus and through strengthening debt-management to gradually reduce the debt and the weight of debt servicing on the economy.

Easing the country's debt is high on the agenda of the government. According to Kouchouk in remarks at a high-level seminar on "Debt and Development in Developing Countries", Egypt is implementing a comprehensive strategy to ease the debt burden, "particularly by gradually reducing the external debt component on an annual basis."

He said that the government is also adopting a framework to transform the debt into investment, thereby generating optimal economic and developmental returns for stakeholders.

During his press conference, Azour pointed to the importance of flexibility in the exchange rate to preserve the economy from external shocks. The Egyptian pound's "flexibility has proven to be beneficial to the stability of the economy," at times of high levels of uncertainty and external shocks, he said.

The flexibility of the exchange rate has been one of the sticking points in Egypt's agreement with the IMF.

It was recently tested when investors exited Egypt along with other emerging markets following US President Donald Trump's announcement on 2 April that he would impose tariffs on all US trade partners. Following the announcement, the value of the pound fell against the dollar, though later it gained ground.

The US trade tariffs featured high in the discussions during the Spring Meetings. The IMF slashed its forecast for global growth this year by 0.5 per cent down to 2.8 per cent in the wake of Trump's new tariff policies.

Azour said these policies would have limited impacts on countries in the region because of their limited trade dependence on the US. However, he warned of the indirect impacts on financial stability and capital flows.

Nonetheless, he said in any change there were also prospects. He suggested that the countries of the region seek new opportunities by "strengthening their economic relationships and trade ties with regions close to them, as well as within countries in the region, which will call for new ways of increasing connectivity and cooperation."

From : Al-Ahram