IMF approval opens door to $2.3bn for Egypt reform programme

The International Monetary Fund has cleared key milestones in Egypt’s long-running economic reform programme, enabling the North African nation to secure about $2.3 billion in fresh financing under its Extended Fund Facility and Resilience and Sustainability Facility arrangements. The funding marks a significant injection into a programme expanded to roughly $8 billion, designed to stabilise macroeconomic conditions and support structural changes that have underpinned government policy over the past two years.

The Executive Board of the IMF completed the combined fifth and sixth reviews of Egypt’s economic reform plan, alongside another evaluation under the newer Resilience and Sustainability Facility. That process unlocks roughly $2 billion under the core Extended Fund Facility, complemented by about $273 million from the RSF, bringing the total disbursements under both arrangements to around $5.2 billion.

The programme, originally agreed as a $3 billion package in December 2022, was scaled up and extended in March 2024 in response to persistent inflation and a shortage of foreign currency that destabilised the economy. Inflation, which surged to near 38 per cent in late 2023, has been taken down to the low double digits, and balances in foreign exchange markets have improved through a mix of IMF support, stronger tourism receipts and inward investment commitments from Gulf-based governments and private investors.

IMF officials have pointed to the progress on macroeconomic stabilisation as a key rationale for advancing the triggers for these disbursements. Close monitoring of fiscal and monetary policy has been central to this assessment, with authorities maintaining tight expenditure control and measured interest rate settings that have helped anchor inflation expectations. Recent data show that Egypt’s currency reserves have stabilised after severe pressures in prior quarters, offering breathing room for the central bank’s policy toolkit.

Despite these gains, the IMF has underscored the uneven progress on structural reforms that lie at the heart of the extended loan’s objectives. A core plank of the programme has been to reduce the dominance of state-owned enterprises in sectors ranging from manufacturing to energy, encouraging private sector participation and transparency in public finances. IMF communications have flagged that these institutional changes have lagged the macroeconomic achievements, particularly the pace of divesting state assets and modernising regulatory frameworks to spur competition.

Legislative amendments passed last year were intended to accelerate the sale of state-owned firms and open up sectors long controlled by public stakeholders, but such moves remain politically sensitive. Analysts say that achieving broad acceptance of these market-oriented measures, especially where vested interests are entrenched, will require concerted dialogue between the government, private sector actors and civil society groups.

Officials in Cairo have welcomed the IMF’s vote of confidence in the programme’s direction. Government spokespeople have emphasised the importance of uninterrupted access to international finance as a stabilising force that supports investment, job creation and long-term growth prospects. The finance ministry has said that the upcoming budgetary cycle will integrate the latest IMF guidance, with an eye towards fiscal sustainability and protecting social spending on healthcare, education and safety nets.

Economists tracking Egypt’s economic trajectory note that robust sectors such as tourism, logistics and services have been critical in cushioning the impact of earlier currency volatility. Tourist arrivals have returned to pre-crisis levels, and remittances from Egyptians working abroad have delivered a steady flow of foreign exchange. These dynamics have helped narrow the current account deficit and bolstered confidence among foreign portfolio investors.

The IMF’s RSF component, a relatively new financial instrument designed to help countries cope with structural and resilience challenges including climate risks and sustainable growth needs, has been spotlighted as an important complement to traditional lending mechanisms. Under the RSF, Egypt has been working on dedicated policies aimed at structural transformation, with an emphasis on inclusive growth and environmental resilience.

Critics of the IMF programme argue that conditionalities tied to structural reforms can impose social costs, particularly if market liberalisation outpaces social safety measures. Some advocacy groups have raised concerns that rapid privatisation can erode public control over essential sectors, citing historical debates on the impact of external financial conditionality on Egypt’s socioeconomic fabric. Balancing macroeconomic objectives with inclusive policy outcomes remains a contested space within national discourse.