Egypt’s path to economic recovery hinges on IMF reforms, fiscal discipline

As Egypt navigates its economic recovery, a notable divergence has emerged between Government projections and IMF estimates regarding public debt reduction.

While the Egyptian Government targets a reduction of public debt to 85% of GDP by the end of FY2024/25 and to 80% by mid-2027, the IMF forecasts a slower decline from 92.9% to 73.9% over the same period. This gap underscores the impact of persistent debt servicing costs and reinforces the imperative for sustained fiscal prudence and credible policy execution.

The next phase of engagement with the IMF prioritizes four key areas crucial for Egypt’s macroeconomic stabilization: achieving a primary surplus of 3.5–4% of GDP, reforming untargeted subsidies, and enhancing revenue collection through improved tax systems. Transparent foreign exchange policies are equally vital. Egypt’s move to float the pound in March 2024 was a pivotal step; however, ensuring a consistent and accessible interbank FX system, along with clear communication on major financial agreements, remains essential to market confidence.

Privatization stands out as another critical pillar of reform. Accelerating the implementation of the State Ownership Policy and advancing transactions involving state-owned firms like Wataniyyah and Safi will serve as tangible signs of progress. Rationalizing state-owned enterprise incentives and integrating them into a transparent fiscal framework will also help rebuild trust among private investors and international partners, while enhancing public sector efficiency.

Strengthening debt management practices will be fundamental to mitigating long-term fiscal risks. Egypt must aim to reduce reliance on short-term external borrowing, publish data on contingent liabilities, and shift towards concessional and long-term domestic financing. The coming year will be pivotal: delivering on IMF benchmarks, increasing transparency, and demonstrating reform commitment will determine Egypt’s access to further disbursements and its capacity to establish a resilient, inclusive, and private sector-driven economy.