At a time when Prime Minister Mostafa Madbouly announced that the latest review by the International Monetary Fund confirms that the Egyptian economy has become more capable of withstanding shocks, and that the economic reforms the government has adopted since launching its reform programme in 2016, foremost among them the liberalisation of the exchange rate, the reform of the energy pricing system and the control of public spending, have begun to bear fruit, with an improvement in a number of macroeconomic indicators, a rise in foreign currency reserves, the relative stability of the foreign exchange market and the return of foreign inflows, other indicators reveal continuing pressures on the cost of living facing citizens, in the form of rising prices of food, housing and services, a widening debt service burden and the decline in households’ purchasing power.

Following the approval by the IMF Executive Board of the disbursement of about $1.8 billion to Egypt, after the completion of the seventh review under the Extended Fund Facility and the second review under the Resilience and Sustainability Facility, the total Egypt has received under the programme rose to about $7.3 billion.

On the other hand, a few days after these statements, the government announced a new increase in electricity prices, adding to a series of measures raising the prices of fuel and public services seen in recent years within the framework of the economic reform programme. This raises a question about whether Egyptian households, too, are able to withstand shocks, and why the ordinary citizen has not felt what the IMF’s reports praise.

A more resilient economy in the face of shocks, so what about the figures?

In its assessment of an economy capable of withstanding shocks, the International Monetary Fund relies on a set of indicators, most notably the size of international reserves, exchange rate flexibility, the stability of the financial sector, levels of debt and the state’s ability to service it, fiscal discipline and the availability of sustainable sources of foreign currency, in addition to the economy’s ability to restore growth after crises.

The IMF Executive Board had completed the seventh review on 30 July, under the 48-month “Extended Fund Facility” arrangement, and the second review under the “Resilience and Sustainability Facility” with Egypt.

The completion of the two reviews allowed Egypt to draw about 1.11 billion units of Special Drawing Rights (SDRs), equivalent to about $1.5 billion, under what the Fund called the “Extended Facility”, in addition to 200 million SDR units, equivalent to about $272 million, under the “Resilience and Sustainability Facility”, bringing the total amounts Egypt has received under the two agreements to about 5.4 billion SDR units, equivalent to about $7.3 billion.

In its assessment of the Egyptian economy, the International Monetary Fund said in the second review report that Egypt faced the repercussions of the war in the Middle East from “a stronger macroeconomic position” compared with previous periods of external pressure, citing strong economic growth, the downward trend in inflation and the rise in gross international reserves. The Fund considered that the economic impact of the war on Egypt remained relatively limited, attributing this to the measures taken by the authorities, foremost among them exchange rate flexibility, energy price adjustments and measures aimed at containing budget spending.

The data show that a number of macroeconomic indicators have indeed improved markedly in recent years, but this improvement has not come at the same pace in the indicators linked to living standards, which have a direct impact on citizens, revealing a state of contradiction between an improving macroeconomy and growing crises in the cost of living.

For example, foreign currency reserves improved markedly in recent years, rising from $15.33 billion at the end of 2014 to $56.3 billion at the end of July 2026, an increase of more than $40 billion, the highest level the reserves have reached in Egypt’s history.

Foreign currency reserves have gone through varying periods of jumps and declines since Egypt began implementing the economic reform programme in 2016 until now: they rose from $24.27 billion at the end of that year to $42.55 billion at the end of 2018, before falling to $40.06 billion in 2020 under the impact of the coronavirus pandemic, then rising again gradually to reach $47.11 billion at the end of 2024, driven by exceptional inflows, among them the Ras El-Hekma deal and increased financing from the IMF and development partners, in addition to the improvement in remittances from Egyptians working abroad.

Remittances from Egyptians working abroad are one of the most important sources of foreign currency for the Egyptian economy, alongside revenues from tourism, exports and foreign direct investment. Their importance for the foreign reserves is all the greater because they provide recurring dollar inflows throughout the year, which the banking system can use to meet market needs and to finance part of imports and external obligations.

These inflows saw a marked rise after the measures to liberalise the exchange rate in March 2024, as remittances from Egyptians working abroad rose in fiscal year 2024/2025 to about $36.5 billion, compared with $21.9 billion in the previous fiscal year, an increase of 66.2%. This trend continued during fiscal year 2025/2026, with remittances recording about $43.1 billion in the period from July to May, an increase of 31.2% compared with the same period of the previous fiscal year.

Alongside the remittances of Egyptians abroad, the deal to develop the Ras El-Hekma area, announced in February 2024 between the Egyptian government and the sovereign wealth fund “Al-Qabida” (ADQ) in the UAE, was one of the largest exceptional inflows of foreign currency to Egypt in recent years. The total value of the deal was $35 billion, of which $24 billion was new financing in return for obtaining the rights to develop the area, in addition to the conversion of $11 billion in Emirati deposits at the Central Bank of Egypt into investments inside Egypt.

These inflows helped change the position of the reserves within a short period. Net international reserves rose to about $47.2 billion at the end of June 2024, compared with about $35 billion in June 2023, driven mainly by the large inflows linked to the Ras El-Hekma deal. The deal came as a lifeline for the Egyptian economy, as it provided large dollar inflows that helped ease the crisis of foreign currency shortages and the backlog of demand for the dollar.

Energy price adjustment

The “energy price adjustments” praised by the IMF, among the measures that, according to its assessment, helped strengthen the Egyptian economy’s ability to withstand shocks, came in the context of a continuous series of increases in energy prices that Egypt has seen from 2014 until this year. In March of this year, fuel prices rose again against the backdrop of the repercussions of the Israeli-American war on Iran and the resulting halt of Israeli natural gas supplies to Egypt, before they were later resumed.

This came about two and a half months after the announcement of a huge agreement between Egypt and Israel to export natural gas to Egypt, worth an estimated $35 billion, an agreement that in turn provoked political and parliamentary criticism and objections, especially as the crisis of gas supplies returned to the fore during the military escalation in the region.

In this context, Freddy El-Bayadi, a member of the House of Representatives and deputy head of the Egyptian Social Democratic Party, submitted an urgent parliamentary question to the Prime Minister and the Ministers of Petroleum and Electricity about how prepared the government is to manage the energy file and guarantee the security of supplies in light of the military escalation between Iran, Israel and the United States and the regional spread of its repercussions, and the expected impact of this on the Egyptian economy and energy security.

For his part, Dr Gouda Abdel Khalek, professor of economics and former Minister of Supply, says that talk of the Egyptian economy turning into a more resilient economy, more capable of withstanding external shocks, in light of the seventh review of Egypt’s programme with the International Monetary Fund, requires a different reading that goes beyond the financial indicators on which the Fund and the government rely.

He explains, speaking to Zawia3, that the war waged by the United States and Israel on Iran, and the accompanying disruption of supply chains and closure of the Strait of Hormuz, and the resulting negative repercussions for the energy situation in Egypt, represent one of the external shocks to which the Egyptian economy has been exposed.

The professor of economics considers that the IMF’s talk of exchange rate flexibility, adjusting energy prices and taking measures to contain the deficit by restricting spending may appear neutral on the surface, but carries direct repercussions for citizens. He explains that talk of “exchange rate flexibility” does not only mean allowing the exchange rate to move in both directions, but means, in the Egyptian case, the continued decline in the value of the pound and the resulting effects on prices and purchasing power.

He also explains that a decline in the value of the national currency leads, in any country and not only in Egypt, to a redistribution of income between those with fixed incomes and the groups that have a greater ability to adjust their incomes. He points out that wage earners, among them millions of government employees and private sector workers, as well as pensioners, are directly affected by the decline in the value of the currency and rising prices, while self-employed professionals, traders and others who are able to adjust their incomes benefit more.

And that lowering the exchange rate, according to the former Minister of Supply, leads to “sinking the middle class and the poor to the bottom of the social ladder”, which he considers a very high cost if viewed from the angle of national security in its broad sense. And that the narrative that the Egyptian economy has become more capable of withstanding shocks because of exchange rate flexibility needs to be amended and read differently from the point of view of society as a whole, noting that there are segments that have benefited from this situation, alongside the government, while other groups have paid the price and seen the pressures on their living conditions increase.

Abdel Khalek addressed what the IMF calls “energy price adjustment”, saying that he had stressed on more than one occasion that talk of energy subsidies in Egypt needs to be reviewed. And that the letter of intent that preceded Egypt’s borrowing from the International Monetary Fund includes a commitment by the government to review energy prices periodically with the aim of reducing subsidies.

The former Minister of Supply points out that the letter of intent, which is a short document, is accompanied by an annex considered part of it, known as the «Memorandum of Economic and Social Policies», which contains the measures the government undertakes to implement according to specific dates and figures. He said that the mechanism for adjusting the prices of petroleum products depends, according to what is stated in the agreement, on the global price of oil, so that the extent of the rise or fall in the global price is considered, and then a proportion of it is factored into the price adjustment process.

The letter of intent, according to the International Monetary Fund, is an official document submitted by the relevant authorities of a country to the IMF, usually signed by the finance minister and the central bank governor. The document sets out the economic and financial policies and measures the government undertakes to implement during the financing programme, including those relating to fiscal and monetary policy, the exchange rate and structural reforms.

The letter of intent is an essential part of the economic reform programme documents, as it sets out the government’s commitments, the implementation of which the Fund assesses during the programme’s periodic reviews. After the programme’s procedures are completed and it is approved by the Fund’s Executive Board, the implementation of the commitments can be linked to the release of the agreed financing tranches.

The former Minister of Supply explains that the basic problem lies in the fact that Egypt does not import all the oil it consumes from abroad, and that Egypt in fact imports only about half of its needs of petroleum products while producing the other half locally, questioning the economic wisdom of calculating the cost of all the oil Egyptians consume according to the global price.

Abdel Khalek described the application of this logic as “economic fraud”, explaining that applying the global price makes sense when a commodity is entirely imported, but if the commodity is partly produced from local resources, the citizen should not be charged the cost of the local part at the global price. He considers that raising energy prices in this case is like imposing a tax, but he considered it an “unjust tax”, because its effect is harsher on the lower-income groups.

He pointed out that the increases in the price of diesel, on which taxis, buses and other vehicles depend, were higher than the increases in the price of 95-octane petrol, considering that this reveals a degree of social discrimination, and he said that this, in the language of public finance and economics, is equivalent to imposing a “regressive tax”, that is, a tax whose effect is harsher on the poorest groups and lighter on the higher-income groups.

For his part, Mohamed Ramadan, economic researcher at the Egyptian Initiative for Personal Rights (EIPR), considers that the government’s commitment to the measures agreed with the International Monetary Fund, such as applying a more flexible exchange rate and raising energy prices, does not necessarily mean that the Egyptian economy has become more capable of withstanding shocks.

Ramadan says these measures are part of the economic reform programme, but they are not enough on their own to build an economy capable of withstanding external crises, noting that recent regional developments have proven the continued fragility of the Egyptian economy, as the turmoil in the region was quickly reflected in the exchange rate, and its effects then passed through to inflation rates, which confirms, in his view, that the economy still faces major challenges.

He adds that the International Monetary Fund itself does not consider the fiscal and monetary reforms sufficient, as it continues in its reviews to stress the need to complete structural reforms, foremost among them the state asset offerings programme, improving the competitive environment, strengthening transparency and reducing the role of the state in economic activity. He considers that these reforms are still lagging, which limits the economy’s ability to achieve more sustainable growth.

Despite the improvement in some macroeconomic indicators, Ramadan points out that this does not necessarily mean an improvement in citizens’ living conditions, explaining that the citizen will only feel the results of reform if their real incomes rise and their purchasing power improves. He adds that continuing price rises, together with the impact of exchange rate devaluations on inflation, reduce the extent to which the improvement in macro indicators is reflected in citizens’ daily lives.

He stresses that the nature of economic growth is no less important than its rates, explaining that growth based on productive sectors, such as industry and agriculture, differs in its effect on employment and incomes from growth led by sectors such as real estate and construction. He concludes that citizens’ benefit from economic growth ultimately depends on how its fruits are distributed, and not on the growth rate alone.

Exchange rate liberalisation and its effect on the economy

Dr Gouda Abdel Khalek, professor of economics, goes back to the beginning of the economic reform programme, explaining that the origin of the current relationship between Egypt and the International Monetary Fund dates back to 2016, when Egypt signed an agreement with the Fund to obtain financing for the Egyptian government with a total value of $12 billion, in return for commitments the government undertook to implement.

He points out that the Egyptian government, before signing the agreement in November 2016, took a decision to float the pound, which he described as one of the most important prior measures to the signing of the agreement. And that the flotation of the pound led to a decline in the value of the currency, and that the price of the dollar was in the range of 8 to 9 pounds, then rose immediately after the flotation to about 16 and 17 pounds, before later reaching much higher levels whether at the official level.

The professor of economics continues that the value of the pound against the dollar has declined sharply since 2016, alongside other commitments the government undertook, among them selling part of the public sector, opening the field to the private sector and investment, reducing the intervention of the so-called sovereign bodies in economic activity, as well as reducing subsidies. He points out that he warned the government at the time against going down the path of flotation, and proposed an alternative plan to secure the sum of $12 billion without resorting to this path, but his vision received no response.

He adds that the decline in the national currency’s exchange rate was directly reflected in the costs of government and private projects and in production costs, especially in an economy that depends to a high degree on imported inputs.

The former Minister of Supply considers that the solution, from his point of view, does not lie in freezing the exchange rate, but in ensuring a degree of stability for it, and that achieving this requires a set of policies, among them reconsidering the structure of Egyptian production, identifying the gaps of strategic significance and directing investments to fill them, in a way that helps reduce the effect of external shocks on the domestic situation.

He stresses that the Egyptian economy also needs to increase the degree of linkage between its different sectors, instead of the external shock passing directly into the domestic economy. He gave the example of agriculture and industry, explaining that Egyptian agriculture’s dependence on industry has become less than it was 50 years ago, and that industry in turn has become less dependent on local agricultural production. He pointed out that the contraction of cotton cultivation, for example, led to a decline in the production of cottonseed, which was reflected in the production of oils, adding that Egypt depends on abroad to supply no less than 80% of its consumption of vegetable oils.

Egypt’s external debt more than tripled in about 12 years, according to the official data of the Central Bank of Egypt, from $46.1 billion at the end of 2013/2014 to $161.2 billion at the end of 2024/2025, an increase of about $115.2 billion, or 250%. According to the latest available data, external debt reached $163.9 billion at the end of the second quarter of 2025/2026, an increase of about $2.7 billion compared with the end of 2024/2025.

Government spending and budget control

Professor of economics and former minister Gouda Abdel Khalek addressed the third factor on which the International Monetary Fund relies in assessing the Egyptian economy’s ability to withstand shocks, namely containing public spending. He explained that public spending in the state’s general budget is divided into two main parts: social spending directed at supporting welfare and services, which includes education, health and subsidies, and non-social spending directed at sovereign and purely economic sectors, such as spending on government offices and investment in roads, bridges and others.

He says that what is required is not only controlling citizens’ spending, but also controlling government spending. He points out in his remarks that wages increased by 10%, while the inflation rate was higher than that, explaining that an increase of 10% in a person’s income while prices rise by 15% ultimately means a decline in their purchasing power.

Abdel Khalek criticises the multiplicity of government headquarters and the movement of its meetings between different cities, considering that this represents a cost to the state. He pointed out that there is more than one government headquarters in Egypt, among them a headquarters in Garden City, a headquarters in the New Administrative Capital and a headquarters in El Alamein, in addition to other headquarters, and said that the multiplicity of headquarters represents a cost whose size the citizen does not know precisely, but knows is not small by the standards of economics.

He adds that the number of ministries in Egypt exceeds 30, considering that the state could reduce the number to about 20 ministries, in a way that helps improve the management of government and reduce expenditure, and he gave examples of the possibility of merging or reorganising some ministries, such as the files of energy, water, agriculture, culture and media.

He also stresses that reducing the number of ministries does not mean weakening the state, but requires that the government be present, effective and capable of oversight. He adds that controlling government spending must be an essential part of any economic reform programme, in parallel with protecting the social groups most harmed by the policies of raising prices and lowering the value of the currency.

Since the minimum wage was set at EGP 2,000 per month in 2019, until it reached EGP 7,0 for the private and public sectors, before rising again to EGP 8,000 for employees of the state’s administrative apparatus and government bodies as of 1 July 2026.

On the other hand, the headline inflation rate rose from 3.1% in 2019 to 14.3% in June 2026, while core inflation rose from 2.7% to 14.3% over the same period. Prices recorded their highest rates of increase during the wave of inflation that began in 2022, when headline inflation reached 16.2%, then jumped to high levels of 35.8 in 2023/2024, before falling back to 12.5% in 2025.

Economic researcher Hassan El-Barbary explains that the main inflation indicators on which both the Central Agency for Public Mobilisation and Statistics (CAPMAS) and the Central Bank of Egypt rely are monthly inflation and annual inflation, explaining that monthly inflation measures the change in the price level from one month to the next, while annual inflation compares the price level in a month of the current year with the same month of the previous year.

El-Barbary tells Zawia3 that a decline in the inflation rate does not necessarily mean a decline in prices, but indicates a slowdown in the pace of their rise, and that if inflation was 12% in January, then fell to 11% in February and 10% in March, this does not mean that prices fell, but means that the speed of their rise has become slower.

He adds that inflation measures the pace of price increases in a market economy, not the direction of prices as such, explaining that a commodity whose price was EGP 100 may rise to EGP 150, and in another case may rise to EGP 120; in both cases there is a rise in price, but the difference lies in the rate of the increase and its speed.

The economic researcher points out that the same applies to annual inflation, as the price level in a month of 2026 is compared with the corresponding month in 2025, which makes it possible to measure the change in the price level over a year and to determine whether the pace of price increases has accelerated or slowed.

As for cumulative inflation, El-Barbary explains that it is “not one of the main indicators announced separately”, but it can be extracted from the available statistical data, and it is calculated over a specific period of time, such as six months or a full year, starting from a certain point in time until the end of the period being measured.

He stresses that cumulative inflation is not calculated by directly adding up monthly inflation rates; if inflation recorded 10% in January, 10% in February and 10% in March, it cannot be said that cumulative inflation reached 30% simply by adding the percentages, because the increase in each month is calculated on the price level reached in the previous month.

He gave an illustrative example, saying that a commodity priced at EGP 100 may rise, as a result of successive increases, to higher levels every month, so that each increase is calculated on the new price and not on the original price, explaining that the aim of calculating cumulative inflation is to know the actual amount of the increase in the prices of goods over a specific period of time. He stressed that this indicator «has strong and realistic significance» when trying to measure the evolution of the cost of living and living conditions in Egypt, because it shows the extent of the change in the price level over a whole period of time, and not only the speed of its change from one month to the next.

Why does the citizen not feel the improvement of the shock-resilient economy!

On the reasons why Egyptian citizens do not feel the improvement in the economy that won the approval of the International Monetary Fund, economic expert Elhamy El-Merghany considers that talk of the Egyptian economy’s ability to withstand shocks does not, from his point of view, reflect the economic and social reality, considering that a number of basic indicators still reveal structural imbalances.

El-Merghany tells Zawia3 that the continuing trade balance deficit, the rising burden of debt service, which takes up a large share of the uses of the general budget, the decline in self-sufficiency rates for a number of crops, in addition to rising production costs and the unfairness of the tax system, are all indicators that lead him to doubt the description of the economy as having become more robust.

He adds that the test of the economy’s ability to withstand shocks is not through financial indicators alone, but through how it deals with successive crises. He points out that the Egyptian economy was affected by the coronavirus pandemic, then by the Russian-Ukrainian war, then by the war in Gaza, and finally by regional tensions, and each crisis, according to him, was followed by economic measures that were reflected in the form of additional burdens on citizens.

Regarding the International Monetary Fund’s assessment, El-Merghany considers that the Fund focuses primarily on indicators of financial stability and the state’s ability to meet its obligations and pay debt instalments and interest, more than on indicators of living standards. He points out that the delay in some of the programme’s reviews in the past period was also linked to the Fund demanding more reforms, among them accelerating the asset sale programme, completing the liberalisation of the exchange rate and reducing subsidies.

El-Merghany stresses that the improvement in some macroeconomic indicators does not necessarily mean an improvement in citizens’ lives, explaining that the indicators that best express the reality of living conditions are inflation, real wages, food prices, rents, the prices of electricity, water, gas and transport, as well as the cost of education and healthcare. He considers that the decline in purchasing power, the exclusion of hundreds of thousands of families from the ration card subsidy system and the rising cost of living reflect a reality different from the picture presented by the macro indicators.

El-Merghany concludes that the crisis, in his opinion, stems from the continuing suffering of the productive sectors, foremost among them agriculture and industry, while growth depends to a greater degree on sectors such as real estate and contracting, which limits the extent to which the improvement in macro indicators is reflected in levels of employment, incomes and living standards.

Dr Gouda Abdel Khalek, meanwhile, considers that the assessment of the Egyptian economy should not stop at the government’s ability to secure financing or achieve financial stability, but must extend to the effect of economic policies on society. He said that the conclusion reached by the International Monetary Fund, which pleases the government, regarding the Egyptian economy’s ability to withstand external shocks does not take into account, from his point of view, the social and economic dimension, and stops at the financial dimension only.

In the same context, he points out that some high-income groups have a greater ability to bear rising prices, while those with fixed incomes, pensioners and wage earners face a greater impact from the decline in the value of the currency and rising prices.

Abdel Khalek also stresses that the government and the International Monetary Fund focus on reducing subsidies for bread, energy and other items, while waste and extravagance in the spending of public money do not receive the same degree of attention. And that controlling government spending must be an essential part of any economic reform programme, in parallel with protecting the social groups most harmed by the policies of raising prices and lowering the value of the currency.

According to the experts who spoke to the report, and the official data on which it relied, a more robust economy is measured not only by its ability to provide dollars, repay debts and implement the commitments of the IMF programme, but also by its ability to build a stronger productive base, protect purchasing power, expand job opportunities, control markets and public spending, and provide real tools for oversight and accountability, including at the local level.

The question that the IMF’s reviews alone do not answer remains: if the Egyptian economy has become more capable of withstanding external shocks, when will this capacity be reflected in citizens’ lives, and when will the Egyptian household itself become more capable of withstanding the cost of reform?

Editorial correction: The first version of the report stated that fuel prices rose three times during the first quarter of 2026; in fact, they rose once, in March 2026.

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