Africa’s largest IMF borrower nears $1.6 billion IMF payout as reforms steady economy despite Middle East shocks

Africa’s largest IMF borrower, Egypt is moving closer to unlocking about $1.6 billion in fresh International Monetary Fund financing after reaching a staff-level agreement that signals renewed confidence in Cairo’s reform programme despite pressure from regional conflict, inflation and high external financing needs.

• Egypt has reached a staff-level agreement with the IMF that could unlock about $1.6 billion.
• The IMF said the impact of Middle East conflict on Egypt’s economy has remained relatively contained.
• Growth reached 5.2% in the first three quarters of the fiscal year, but inflation remains elevated.
• The Fund urged Cairo to maintain tight policy, exchange-rate flexibility and faster state asset sales.

The agreement covers the latest reviews of Egypt’s Extended Fund Facility and Resilience and Sustainability Facility.

If approved by the IMF’s Executive Board, Cairo will receive about $1.5 billion under the EFF and $136 million under the RSF, bringing total disbursements under the arrangements to about $7.2 billion.

The deal gives President Abdel Fattah el-Sisi’s government fresh breathing space as it tries to sustain an economic recovery that remains exposed to geopolitical tensions, energy import costs, portfolio flows and investor confidence.

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Why it matters

Egypt is one of Africa’s most systemically important economies. It is also one of the countries most exposed to shocks from the Middle East because of its reliance on foreign capital, imported energy and revenues from strategic routes such as the Suez Canal.

The IMF said the impact of the war in the Middle East on Egypt’s economy had remained “relatively contained,” helped by what it described as timely policy measures, including fuel and electricity price adjustments, limits on government energy consumption and reprioritised spending.

That assessment matters because Egypt has spent the past two years trying to rebuild confidence after a foreign currency crisis, high inflation and repeated pressure on the pound forced Cairo back into deeper IMF-backed reforms.

Growth returns

The IMF said Egypt’s real GDP grew 5% in the third quarter, taking growth for the first three quarters of the fiscal year to 5.2%.

The stronger growth suggests that the economy is recovering from one of its most difficult periods in years, helped by improved foreign exchange availability, tighter fiscal management and renewed external financing.

Foreign reserves have also strengthened, rising to $53.13 billion in May from $48.53 billion a year earlier, according to central bank data.

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Inflation risk

But the recovery remains fragile. Urban inflation stood at 14.6% in May and is projected by the IMF to rise to 15.8% by the end of the fiscal year, keeping pressure on households and limiting room for aggressive monetary easing.

The Fund urged Egypt to maintain tight monetary policy and keep exchange rate flexibility as its “first line of defence” against external shocks, especially as geopolitical tensions continue to threaten energy prices and capital flows.

Fiscal discipline & state exit

Egypt also exceeded its primary balance and tax revenue targets by the end of March, according to the IMF.

The Fund expects the country’s primary surplus to rise to 5% of GDP in the 2026/27 fiscal year from 4.8% in 2025/26, reflecting the government’s effort to reassure creditors and investors that it can manage debt while keeping reforms on track.

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The harder test now is structural reform. The IMF said swift implementation of Egypt’s State Ownership Policy, including faster divestment of state assets, remains critical to building private sector-led growth.

That point is central. Egypt’s recovery cannot depend only on IMF money, Gulf support and high interest rates. Investors want to see whether Cairo can reduce the state’s large footprint in the economy and give private businesses more room to compete.

Earlier in June, Egypt’s cabinet granted four state-owned companies preliminary listings as part of its privatisation programme, a move aimed at accelerating asset sales and attracting fresh capital.

Long road

Egypt first agreed to a $3 billion IMF loan in December 2022. The programme was later expanded to $8 billion in March 2024, when the country was facing severe inflation, foreign currency shortages and mounting pressure on public finances.

The latest staff-level agreement shows that Cairo has made enough progress to keep the IMF programme moving.

But it also underlines the trade-off facing the government: painful reforms are helping restore stability, but inflation, subsidy cuts and higher energy prices continue to test households and businesses.

For now, the IMF’s message is clear. Egypt’s economy is stabilising, but the recovery will depend on Cairo staying the course on tight policy, exchange-rate flexibility and faster state asset sales.