On a two-week visit aimed at discussing the fifth and sixth reviews, postponed for five months, of the negotiations with Egypt, an International Monetary Fund mission arrived in Cairo a few days ago, while informed sources at the Ministry of Finance confirm to Zawia3 that the ongoing discussions aim to reach an agreement allowing the disbursement of the delayed loan tranche worth $2.7 billion before the end of the current year, noting that the discussions are marked by a degree of tension owing to the government programme’s delay in fully exiting public-sector institutions, while the government has pledged to offer around 11 companies across various economic sectors for privatisation during the first quarter of next year, 2026.

Last July, the IMF decided to postpone the fifth review of the $8 billion Extended Fund Facility programme and merge it with the sixth review, on the grounds that more time was needed to make progress on the state’s exit from the economy and the broader reform agenda.

For his part, Prime Minister Mostafa Madbouly said on Wednesday that he had held a meeting with the Fund’s mission and that “things are going well with the International Monetary Fund, and there will be positive news within the next two days”.

The Fund places the privatisation file at the heart of its programme with Egypt, as the fastest route to reducing the state’s presence in the economy and attracting hard currency through foreign investment. In the latest (fourth) review, the Fund stressed the need to accelerate the exit from public-sector companies, especially those that hold the lion’s share of the market, such as cement, steel and marble companies. However, this pressure collides with a complex reality: sales take a long time for valuation, pricing and negotiation, while the Fund demands urgent results.

Although the periodic reviews show a limited improvement in indicators such as inflation and foreign-currency reserves, “the pressure to obtain tangible results in reforming the state sector and the limited progress in divesting state-owned companies” still constitute a source of concern.

In a notable statement issued in the middle of last July, the International Monetary Fund criticised the military establishment’s continued involvement in economic activities in Egypt, warning that the dominance of the state, and especially of the armed forces, hinders growth and limits employment and investment opportunities. The report, issued as part of the fourth review of the $8 billion loan programme, revealed for the first time that the military establishment owns 97 companies, 73 of them in the industrial sector alone, considering that this situation “obstructs growth and prevents the creation of real job opportunities for the private sector”.

In its report, the IMF directly linked the slow implementation of the privatisation programme to its need to merge the fifth and sixth reviews, while the report pointed to a decline in the expected proceeds from the sale of government assets from $3 billion to $0.6 billion by the end of the fourth quarter of 2024 as a result of the slowing pace of divestment. According to the Fund’s spokesperson, Julie Kozack, the faltering implementation of the divestment policy is the reason for postponing the fifth review and merging it with the sixth. Kozack stressed the need to deepen reforms in the public business sector, reduce the state’s role in the economy, and accelerate the pace of selling stakes in government and sovereign companies to ensure the smooth flow of the next financing tranche.

Debt and going round in a vicious circle!

International Monetary Fund data show that Egypt must repay $717.7 million to the Fund during December, in addition to $343 million it paid last November as part of its due debt-service obligations. These payments come within an intensive repayment schedule that coincides with a sensitive phase in Cairo’s relationship with the Fund, especially with the attempts to complete the fifth and sixth reviews of the “Extended Fund Facility” (EFF) programme, alongside the review of the Resilience and Sustainability programme (RSF), which aims to support the economy’s capacity to withstand external shocks and structural transformations.

Under the current agreement, Egypt’s success in passing these reviews will allow the disbursement to it of a new instalment of around $2.7 billion from the Fund, financing that is counted on to strengthen foreign reserves and ease pressures on the balance of payments, amid the continuing large dollar obligations the country faces during 2025 and 2026.

These reviews take on double importance because the Fund stresses, in its recent reports, the need to accelerate the implementation of structural reforms including: enhancing exchange-rate flexibility, expanding the government offerings programme, reducing the role of state-owned institutions, and empowering the private sector, in addition to fiscal reforms related to reducing the deficit and controlling public debt. The Fund is also closely monitoring Egypt’s measures to strengthen social protection in the face of inflation, restructure the subsidy system, and develop policies to attract foreign direct investment.

This comes at a time when the Egyptian government seeks to improve credit rating agencies’ view of its economy, raise the levels of monetary reserves, and create greater fiscal space to deal with expected global shocks, foremost among them fluctuations in energy prices and the tightening of global monetary policies. Cairo is also betting that completing the reviews will send a message of confidence to international investors and development partners, and restore momentum to capital flows into the Egyptian market during the next year.

Dr Mahmoud El-Garf, professor of international economic law, believes that the Egyptian economy is currently going through a phase of relative recovery after years of pressure, a recovery owed in part to the stability of the exchange rate and increased flows of foreign investment, in addition to the decline in inflation rates from their previous peak.

But El-Garf stresses at the same time that this improvement does not mean that the risks have receded entirely, as the set of parallel pressures, from persistent inflation, high population growth and a clear deficit in the balance of payments, still makes the structure of the economy fragile, especially for the most affected groups. He explains that inflation, despite its relative decline, is still at high levels, while the widening of the current-account deficit to around -4.3% of GDP in 2025/2026 points to the economy’s continued dependence on external financing as long as this deficit persists.

El-Garf explains that government expenditure exceeding revenues always pushes the state to borrow to close the financing gap, which aggravates debt levels year after year. He explains that the depreciation of the currency multiplies the cost of servicing external debt, as the value of dollar-denominated instalments and interest rises when converted into pounds. And that these three factors, the fiscal deficit, the current-account deficit and persistent inflation, form the real framework for the continued resort to borrowing, which ultimately leads to a rise in external debt despite Egypt’s commitment to paying high instalments every year.

New government austerity… will it save what remains?

In the middle of last November, the Egyptian government began implementing a broad package of far-reaching fiscal austerity measures, in an attempt to contain the rising public debt and reduce pressure on the budget, amid growing fears that these policies will affect the pace of industrial and investment growth. The measures include raising the prices of energy, transport and government services, along with reducing reliance on sovereign guarantees for major projects in vital sectors such as infrastructure, education, health and transport, which are the sectors most closely linked to job creation and stimulating economic activity.

As part of these policies, the Ministry of Finance issued strict instructions stipulating that no new sovereign guarantees be issued except for projects with high cash returns and clear investment feasibility. It also requested a halt to expansion in the purchase of new assets or imported equipment unless they are self-financed or based on partnerships with the private sector or foreign investors under the systems of (BOT) (build, operate, then transfer ownership) or (PPP) (partnership between the public and private sectors), while working to transfer some operating assets to sovereign funds to finance them outside the general budget, to avoid increasing debt or burdening the treasury with new guarantees for external loans.

The budget document, which circulated in parliamentary circles and details of which were published by the economic newsletter “Enterprise”, indicates that Egypt’s domestic and external debt repayment obligations are set to rise by around 30% to reach around EGP 2.1 trillion in fiscal year 2025/2026, compared with around EGP 1.6 trillion in the current year, distributed between the redemption of bonds and domestic loans and external debts falling due.

This trend intersects with the latest World Bank data and assessments, which show that external debt and its service burden stand at historically high levels compared with previous years and with peer economies, and that debt service has come to take up an increasing share of the general budget at the expense of social and investment spending. The domestic budget figures and the data of international institutions thus reflect a convergent picture of an economy groaning under a mounting debt bill, with repeated warnings of the need to reduce the debt-to-GDP ratio and improve the management of the risks associated with it.​

In the next five years, Cairo faces heavy burdens to repay the debts it owes to the International Monetary Fund, as the tables indicate that 2026 and 2027 represent the peak of these maturities. In 2026, repayment dues reach more than 2 billion Special Drawing Rights (SDR) units, equivalent to approximately $2.6 billion at current market rates. This financial challenge represents a peak in the repayment schedule, which declines gradually in the following years until 2029.

The last ten years recorded a notable increase in the volume of debt: in June 2015 it stood at only around $48 billion, rising in June 2016 to about $55.8 billion, and with the start of the IMF-backed economic reform programme in 2016 and the subsequent liberalisation of the exchange rate, the debt jumped to $82.8 billion in 2017. The rise continued over the following years, reaching $96.6 billion in 2018, then $106.2 billion in 2019, before exceeding the $123.5 billion mark in 2020.

Amid the repercussions of the coronavirus pandemic, external debt rose to $137.8 billion at the end of June 2021, then to $162.9 billion at the end of 2022. In 2023 the debt reached about $168 billion, before falling slightly to $155 billion at the end of December 2024, then rising to $161.2 billion at the end of June 2025, according to the latest data from the Central Bank of Egypt.

For his part, Elhamy El-Merghany, economist and leading member of the Socialist Popular Alliance Party, says that Egypt’s external debt has seen unprecedented leaps over the past decade, explaining that it rose from $34.9 billion in June 2011 to $46.1 billion in June 2014, then continued its sharp rise to reach around $161.2 billion by the end of the fourth quarter of (2024/2025).

El-Merghany stresses that this path has made the Egyptian economy “entirely captive to the International Monetary Fund’s prescriptions”, noting that the management of the economy has become directed primarily at servicing debt, and that Egypt has become the second-largest debtor country to the Fund worldwide. He adds that Central Bank data for 2023/2024 show that debts to international financing institutions account for 38.6% of total external debt, while 66.2% of these debts are repaid in US dollars, which aggravates pressure on foreign-currency reserves because of the continuous repayment obligations of instalments and interest.

El-Merghany insists that the swelling of external debt is not linked only to fluctuations in the dollar exchange rate, but is due in essence, as he puts it, to “a policy of borrowing without controls or oversight”, often directed at financing unnecessary projects or ones that could be postponed, instead of directing loans to productive sectors in agriculture and industry or to projects that reduce dependence on imports. He believes that this approach has entrenched dependence on the International Monetary Fund and its conditions, from the sale of public assets and the empowerment of the private sector at the expense of the state’s role, to the decline of basic services and rising rates of poverty, hunger and malnutrition.

El-Merghany also criticises the absence of parliamentary and popular oversight over the external borrowing file, considering that this absence has contributed to the swelling of debt to dangerous levels. He explains that around 65% of the general budget’s resources are now directed to repaying debt instalments and interest, leaving very little room for spending on development and services. He warns that the current situation “is pushing the economy into the danger zone”, calling for a restructuring of spending priorities and a search for real and sustainable sources of income, instead of the increasing reliance on borrowing that aggravates the fragility of the economic situation year after year.

A gap between the official narrative and international forecasts

International economic reports point to the possibility of a gradual recovery of the Egyptian economy during 2026, with estimates of GDP growth hovering around 4.6–4.7% according to a Reuters poll and IMF forecasts, along with an expected decline in inflation rates to around 11–12% according to Central Bank estimates. This scenario, which is considered the most likely baseline internationally, rests on a mix of gradual monetary easing, exchange-rate stability, and the achievement of primary surpluses that contribute to reducing public debt to less than 80% by mid-year. However, the success of this vision remains conditional on Egypt passing the IMF’s fifth and sixth reviews this December, to secure external financing flows, in which the gap is estimated at between $10 billion and $15 billion.

By contrast, the official discourse tends to adopt a more optimistic picture. The Central Bank indicates the possibility of achieving growth of up to 4.8%, while the agency “Fitch” believes that growth may rise to 5.4%, supported by improved performance in tourism and exports, with a spotlight on what it considers the “achievements” of 2025, especially the decline in public debt by around 11% over two years.

At the end of last September, the Ministry of Planning, Economic Development and International Cooperation announced that the Egyptian economy grew by 4.4% in fiscal year (2024-2025), compared with 2.4% in the previous fiscal year. The ministry explained that GDP recorded a quarterly growth rate of about 5% in the fourth quarter of fiscal year (2024-2025), the highest in three years, compared with 2.4% in the same quarter of the previous year, according to the statement.

The fiscal year in Egypt begins on 1 July and ends on 30 June of the following year. The ministry stressed that economic performance during the last fiscal year contributed to raising the annual growth rate to 4.4%, exceeding the year’s target growth rate of 4.2%, describing this as reflecting the resilience of the Egyptian economy in the face of repeated external shocks, and noting that the growth came as a result of economic policies supporting macroeconomic stability, the governance of investment spending, and the strengthening of the private sector’s contribution, within the framework of the National Programme for Structural Reforms.

The government attributes a large part of this improvement to asset privatisation programmes and foreign direct investment flows, as well as the expected improvement in the credit rating. However, these figures remain higher than the estimates of international institutions by around 0.5 to 1 percentage point.

Last August, Egyptian President Abdel Fattah El-Sisi ratified new legislative amendments aimed at accelerating the procedures for selling government assets within what is known as the “State Ownership Policy Document” programme. These amendments give the Sovereign Fund of Egypt broader powers to sell state-owned assets directly, cutting short procedures that used to take months and perhaps years before any deal was completed.

The law regulates companies whose capital is wholly owned by the state or in which it holds a stake, and includes companies affiliated with ministries, public authorities and state bodies, with exceptions for some companies of a strategic nature or established under international agreements. It also includes multiple mechanisms for disposing of state assets, including sale, offering on the markets, and mergers and divisions, to enhance transparency and economic governance.

It is worth noting that the gap between the two narratives, the international and the official, is evident in each party’s approach: the government relies on immediate indicators such as the performance of 2025 and the growth of some productive sectors, while international institutions warn of deeper risks related to the slowdown of the privatisation programme, the rising cost of debt service, and the possibility of the economy being exposed to external shocks, whether from regional tensions or a potential rise in energy prices.

In the best-case scenario, growth could reach 5–5.5% if the state succeeds in reaping more than $5 billion from the offerings programme and interest rates fall by no less than 300 basis points. The pessimistic scenario, meanwhile, brings growth down to 3–3.5% if the reviews with the IMF falter or the financing gap widens to around $15 billion.

For her part, Dr Taghreed Badr El-Din, assistant lecturer in economics at the Faculty of Politics and Economics at Beni Suef University, believes that the Egyptian economy is currently going through a phase that can be described as “cautious recovery”, noting that macroeconomic indicators show an improvement in growth rates and relative stability at the monetary level, but that this improvement still requires deeper reform efforts to ensure its continuity in the long term.

Taghreed explains, in exclusive statements to Zawia3, that IMF estimates issued in May 2025 expect the Egyptian economy to record a growth rate of up to 4.3% in 2025, compared with only 3% the previous year, while the World Bank raised its forecasts for fiscal year 2025/2026 to 4.2%, with the possibility of reaching 4.6% the following year. These positive forecasts are attributed to increased foreign investment in sectors such as energy and infrastructure, along with the fiscal and monetary reform programme adopted by the government, worth $8 billion, with the support of the International Monetary Fund.

She notes that these indicators, despite being positive, do not necessarily mean an end to the pressures the economy faced in past years, but they reflect a state of relative stability after a difficult period, driven by an improved exchange rate, the gradual return of confidence in domestic debt instruments, and a rise in foreign-currency reserves.

She adds that the International Monetary Fund confirmed in its report issued in July 2025 that Egypt has made notable progress towards achieving macroeconomic stability, particularly with regard to the fiscal deficit, the easing of inflationary pressures and the improvement of the balance of payments. Nevertheless, the Fund stressed that the structural reforms needed to revitalise the role of the private sector and reduce the broad role of the state in economic activity remain limited, and that the road is still long before a real structural transformation is achieved.

With regard to monetary policy, Taghreed affirms that the Central Bank succeeded in containing inflation rates, which had previously exceeded 35%, bringing them down to around 15.2% during the second quarter of 2025, the lowest level the country has recorded since 2022, supported by an improved exchange rate and lower sovereign risk. She expects inflation to stabilise at these levels until the end of the year, before a gradual downward path begins during 2026, bringing it close to the target of (7% ± 2%) in the last quarter of that same year.

Taghreed warns of continuing pressures linked to the public debt file, pointing out that IMF estimates indicate a possible rise in external debt from $162.7 billion in 2024/2025 to more than $200 billion by 2030. She stresses that limiting these risks requires boosting non-tax revenues and adopting effective fiscal consolidation to reduce the growing burden on the budget.

She also notes that the investment environment, despite government moves to improve it by launching a new investment map and expanding private-sector participation, still faces persistent challenges linked to bureaucracy and the lack of clarity of competition rules, factors that represent an obstacle to the flow of sustainable investment.

The economics professor points out that regional and international developments directly affect the Egyptian economy, as the war in the Middle East has led to a decline in Suez Canal revenues, while fluctuations in energy prices have created additional pressures on the budget. On the other hand, the strong performance of the tourism and services sectors helped absorb part of these shocks, with the number of tourists rising by around 12% during 2025 compared with the previous year.

She says that the Egyptian economy is indeed witnessing the beginning of a path to recovery, supported by more disciplined fiscal and monetary policies, but that this recovery remains unbalanced and depends heavily on external capital flows and on the completion of the awaited reforms. She believes that the current situation can be described neither as a complete achievement nor as an illusion, but rather as a delicate transitional phase, which could turn into a real take-off if structural reforms are boldly completed, or could falter if the measures taken remain limited and temporary.

In the same context, a statement issued by the Egyptian Initiative for Personal Rights indicates that ” the government’s celebration of its performance in the last fiscal year 2024/2025 and of achieving the “highest primary surplus” (meaning the difference between revenues and expenditure after excluding debt instalments and interest), the value of which amounted to around EGP 629 billion according to the data announced by the Minister of Finance, cannot be read in isolation from the swelling of debts.

It explained that “the real picture cannot exclude debts, whose instalments and interest take up nearly two-thirds of total government expenditure; indeed, interest payments alone in that year amount to nearly three times the “surplus” that the government is celebrating achieving.”

With the end of another year full of challenges, the Egyptian economy remains at a decisive crossroads in 2026. Despite early indicators of a gradual recovery and the improvement of some macro indicators such as GDP growth and declining inflation, the structural pressures on the state, the mounting debt burdens, and the incompleteness of the privatisation programme still pose clear threats to the sustainability of this recovery.

Cairo’s success in completing the IMF’s fifth and sixth reviews will be a key to securing external financing flows, easing pressure on the balance of payments, and achieving primary surpluses that allow public debt to be reduced gradually. Nevertheless, the most optimistic scenario remains contingent on the government’s ability to implement radical structural reforms, including strengthening the role of the private sector, reducing the economic presence of government institutions, and activating the offerings in the privatisation programme. On the other hand, the pessimistic scenario looms on the horizon if the reviews continue to falter or the financing gap widens, which could limit growth, multiply the state’s dependence on external borrowing, and leave the economy captive to further financial pressures in the coming years.

Editorial correction: The first version of the report stated that the IMF linked the slow pace of privatisation to its need to merge the fourth and fifth reviews; the correct reviews are the fifth and sixth, as stated elsewhere in the report.

Editorial correction: The first version of the report described Julie Kozack as deputy spokesperson of the International Monetary Fund; the correct description is that she is the Fund’s spokesperson and director of its Communications Department.

Editorial correction: The first version of the report gave the name “Resilience and Flexibility programme (RSF)”; the correct name is “Resilience and Sustainability”, as the abbreviation refers to the Resilience and Sustainability Facility.

Editorial correction: The first version of this report said external debt stood at about $55.8 billion at the end of 2016. It reached that level at the end of June 2016, then rose to $67.3 billion at the end of December 2016, according to Central Bank of Egypt data.

Editorial correction: The first version of this report said external debt reached $137.8 billion at the end of 2021. It reached that level at the end of June 2021, the end of the 2020/2021 fiscal year, according to Central Bank of Egypt data.

Editorial correction: The first version of this report said external debt fell to $155 billion in January 2025, according to the latest Central Bank of Egypt data. That figure is for the end of December 2024, and the latest central bank data at the time of publication showed $161.2 billion at the end of June 2025.

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