Egypt awaits US$ 1.2 bn payout after passing IMF’s 4th loan review

The International Monetary Fund (IMF) announced on Tuesday that Egypt passed its fourth review as part of its ongoing US$8 billion loan program with the financial institution.

The staff level agreement at the IMF clears the path for Egypt to receive a sorely needed $1.2 billion tranche, which comes amid a foreign currency shortage exacerbated by a grueling debt repayment schedule.

However, bolstering access and activity in the private sector remains among the fund’s priorities for the program going forward. 

“Staff and authorities agreed on the need to speed up reforms to improve the business environment,” said IMF Egypt Mission Chief Ivanna Hollar. “More decisive efforts are needed to level the playing field.”

The mission’s chief said on Tuesday that reforms should “reduce the [state’s] footprint in the economy, and increase private sector confidence to help Egypt attract foreign investment and develop its full economic potential.”

The IMF has also noted concerns about the military’s role in the economy in prior reviews of Egypt’s economic environment.

Additionally, Hollar emphasized the need for further reforms to enhance domestic revenue mobilization. She cited the government’s commitment to implementing a reform package aimed at increasing tax-to-GDP revenues by two percent over the next two years, focusing on eliminating exemptions rather than raising tax rates.

Yet the international financing body said that, overall, Egyptian authorities had succeeded in continuing to implement key policies to preserve macroeconomic stability despite ongoing regional tensions that have sharply reduced Suez Canal revenues.

In recent months, Prime Minister Mostafa Madbuly estimated that Egypt has lost around $7 billion in Suez Canal revenues due to regional tensions as a result of Israel’s aggression on the Gaza Strip, including the Houthis’ attacks on vessels in the Red Sea.

Egypt signed its current loan program with the IMF in 2022, in the wake of an economic spiral precipitated by Russia’s invasion of Ukraine. Cairo later secured a $5 billion increase in March 2024, raising the loan to $8 billion over 46 months. 

During a visit by IMF officials to Cairo in November, Hollar said that substantial progress had been achieved during consultations with the Egyptian government without announcing the status of the review.

At the time, the IMF noted that the government’s decision to hike the prices of certain goods and services through 2024 “temporarily restrained” progress in inflation control, despite steps to tighten monetary policy. 

In line with IMF recommendations to cut spending on subsidies, the government has hiked the cost of fuel, electricity and bread over the past year, effectively pushing up the cost of living for the entire population.

In her Tuesday statement, Hollar recommended that the government increase spending on critical social programs in support of vulnerable groups and the middle class using its primary budget surplus, which it projected to reach five percent of Egypt’s GDP in fiscal year 2026/27. 

The IMF also recommended comprehensive reforms to rebuild fiscal buffers to reduce debt vulnerabilities, and create additional fiscal space for social spending, particularly in health, education, and social protection.