Cairo, Egypt – July 31, 2025 

Egypt’s economy is navigating a complex landscape, as highlighted by the International Monetary Fund’s (IMF) latest assessments. While the global financial body has offered a cautiously optimistic outlook for near-term growth, it has also sounded a clear warning regarding the pace of structural reforms and the nation’s substantial debt burden.

Mixed Signals on Growth: A Near-Term Boost, Long-Term Concerns

In its recent July 2025 World Economic Outlook Update, the IMF slightly upgraded its growth forecast for Egypt’s economy for the current fiscal year (FY2024/2025) to 4.0%, a 0.2 percentage point increase from earlier projections. This revised optimism stems from “better-than-expected data over the past months,” largely driven by robust performances in key sectors such as non-oil manufacturing, tourism, and telecommunications. Finance Minister Ahmed Kouchouk recently echoed this sentiment, noting a 4.8% expansion in the third quarter of FY2024/2025 and significant growth in industrial and ICT sectors, alongside a 17% rise in tourism.

However, the outlook dims slightly for the subsequent fiscal year (FY2025/2026), with the IMF trimming its growth forecast to 4.1%, a 0.2 percentage point reduction. This downward revision is “mainly due to the delayed implementation of the structural reform agenda,” according to Petya Koeva Brooks, deputy director of the IMF’s Research Department. The IMF has consistently stressed that while Egypt has made strides in economic stabilization, sustained long-term growth is contingent on accelerating these reforms, enhancing private sector participation, and maintaining fiscal discipline.

The Debt Challenge: A Persistent Burden

Egypt’s substantial debt remains a central concern for the IMF and a critical challenge for the government. The country’s general government gross debt is projected by the IMF to be around 86.6% of GDP for 2025. More critically, external debt was approximately $153 billion as of mid-2024, equivalent to about 40% of its GDP, with forecasts indicating it could climb to over $202 billion within five years.

A significant portion of Egypt’s annual budget is consumed by debt servicing. For fiscal year 2025/2026, the government is projected to spend a staggering 65% of its annual expenditures on debt payments. This massive allocation to debt servicing constrains the government’s ability to invest in vital public services and development projects.

The IMF’s latest review, conducted in mid-July 2025 as part of the ongoing $8 billion Extended Fund Facility (EFF) loan program, gently criticized the growing role of the military in Egypt’s economy. It also highlighted the stalled progress on the government’s privatization program, specifically mentioning the Egyptian General Petroleum Corporation (EGPC) and its substantial outstanding deficits. The lack of divestment proceeds not only hinders debt reduction efforts but also means continued subsidization of unprofitable state-owned firms, diverting crucial resources.

Prime Minister Mostafa Madbouli recently affirmed the government’s commitment to maintaining a sustainable downward trend in external debt and attracting more foreign investments. The economic strategy under the IMF program is indeed focused on reducing the general government debt-to-GDP ratio through continued fiscal discipline, while also ensuring adequate social protection spending.

Inflationary Pressures and Other Challenges

While Egypt has made progress in taming runaway inflation, the situation remains fluid. Annual urban headline inflation slightly edged up to 13.9% in April 2025, compared with 13.6% in March, though it cooled to 14.9% in June 2025, breaking a three-month uptrend. Core inflation also saw an uptick in April. The Central Bank of Egypt aims to steer inflation towards its target of 7% (±2%) by the fourth quarter of 2026.

Beyond debt and inflation, Egypt faces other significant economic hurdles:

 * Suez Canal Revenues: Geopolitical tensions in the Red Sea and the wider region, including the conflict in Gaza and recent open conflict between Israel and Iran, have severely impacted traffic through the Suez Canal. The Canal, a critical artery for global trade, reported a 23.1% decline in activity in Q3 FY2024/2025, with some shipping companies rerouting vessels around the Cape of Good Hope, significantly reducing vital revenue.

 * Natural Gas Supply Crisis: A combination of rising domestic demand, inadequate domestic production, and import shortages has led to a natural gas supply crisis, affecting energy security and industrial output.

 * Military’s Economic Role: The IMF has consistently emphasized the need to reduce the state’s footprint in the economy and level the playing field for the private sector. The military’s significant and often opaque role in various economic activities remains a point of concern for fostering private sector-led growth and increasing transparency.

The IMF has announced a delay in the completion of the fifth review of the current $8 billion loan program to December 2025, largely due to the delays in implementing the divestment plan. The Fund is expected to initiate talks for the fifth and sixth reviews in September, with completion anticipated by December.

Egypt’s economic path forward hinges on its ability to accelerate critical structural reforms, including the privatization program, to attract more private investment, boost export-led growth, and ultimately reduce its reliance on debt to achieve sustainable economic prosperity.