10 key facts about Egypt’s $2.5 billion IMF financing package

Egypt has secured a crucial $2.5 billion financing package from the International Monetary Fund (IMF) under the Extended Fund Facility (EFF) and Resilience and Sustainability Facility (RSF). This financial support comes as the country navigates economic challenges, including regional instability and external financial pressures. Here are ten essential facts about the package and what it means for Egypt’s economy.

1. Egypt secures new funding under IMF programs

The International Monetary Fund (IMF) has approved a $2.5 billion financing package for Egypt as part of its Extended Fund Facility (EFF) and Resilience and Sustainability Facility (RSF). This funding aims to support the country’s economic reform efforts amid ongoing financial and external challenges.

2. Fourth review unlocks $1.2 billion in immediate funding

With the IMF’s latest review, Egypt can now access approximately $1.2 billion, increasing its total withdrawals under the EFF program to $3.2 billion. This is part of a larger $8 billion IMF support package designed to stabilize the economy and encourage structural reforms.

3. New fiscal targets for Egypt

The IMF has recalibrated Egypt’s fiscal commitments, aiming for a primary balance surplus of 4% of GDP in FY2025/2026 and 5% in FY2026/2027. These targets are intended to ensure financial sustainability while accommodating necessary economic adjustments.

4. Economic slowdown but signs of recovery

Egypt’s GDP growth slowed to 2.4% in FY2023/2024, down from 3.8% in the previous fiscal year. However, early data from Q1 FY2024/2025 shows a rebound to 3.5%, indicating potential stabilization as economic reforms take effect.

5. Inflation is trending downward

After peaking in 2023, inflation in Egypt has been steadily declining. The IMF projects inflation to average 22.4% until the end of FY2024/2025 and drop to 16.6% by the end of the fiscal year, offering relief to consumers and businesses.

6. External challenges impact foreign reserves

Egypt continues to face external pressures, including regional conflicts and disruptions in Red Sea trade routes, which have affected foreign exchange inflows. However, tourism and remittance flows remain strong, helping to offset some of these challenges.

7. Egypt moves to a flexible exchange rate

In March 2024, Egypt adopted a flexible exchange rate regime, unifying the foreign exchange market. This transition has improved trading activity in the interbank system and is seen as a critical step toward financial stability.

8. Structural reforms see mixed progress

While Egypt has made strides in economic policy, some structural reforms have been delayed, particularly in the divestment of state-owned enterprises. However, improvements in governance, including strengthening the Egyptian Competition Authority, signal progress.

9. Climate-focused financing included

A portion of the new funding comes from the RSF, which supports Egypt’s efforts to combat climate change. The government is focusing on decarbonization, environmental risk management, and expanding renewable energy investments.

10. IMF calls for stronger private sector involvement

The IMF emphasizes the need for Egypt to reduce state control over key sectors and encourage private investment. Strengthening fiscal transparency and improving revenue mobilization are also top recommendations to ensure long-term economic resilience.

Conclusion

The IMF’s latest financing approval provides much-needed support to Egypt as it navigates economic challenges. While inflation is declining and GDP growth is recovering, structural reforms and private sector empowerment will be crucial for sustainable economic progress. With continued policy adjustments and global support, Egypt aims to strengthen its financial stability and resilience in the coming years.