Egypt passes 5th, 6th IMF loan reviews, with fund easing tone of govt criticism

In a Tuesday statement, the International Monetary Fund announced that Egypt passed the fifth and sixth reviews as part of its ongoing US$8 billion loan program.

The passing of the reviews comes after the stalling of the program’s fifth review several months ago, amid statements by IMF spokesperson Julie Kozack on the need to decrease the government’s role in the economy and speed up the asset sales program.  

Kozack’s comments in early July were followed by the fund’s fourth review a few weeks later, which criticized the slow pace of the state’s exit from the economy, including of military-affiliated entities. The government’s slow implementation of its privatization plan prompted the postponement of the fifth review and its merger with the sixth, several informed sources told Mada Masr earlier this month.

The merger of the two reviews took place upon Egypt’s request, the head of the Planning and Budgeting Committee of the outgoing House of Representatives, Fakhry al-Fekky, previously told Mada Masr, explaining that the government wanted time to ink deals that would secure dollar inflows and expand the space available to the private sector.

In the current reviews, where comments made on privatization were remarkably softer than previous ones, the IMF noted the need for the acceleration of “reforms that provide the private sector the space and the opportunity to flourish.”

It also recommended that Egypt speeds up efforts to reduce the state’s role in the economy, including regarding “significant further progress” in the divestment program, exerting more efforts to “level the playing field and avoiding the establishment or expansion of existing SOEs and other economic authorities,” as per the statement. 

The completion of both the fifth and sixth reviews paves the way for the disbursal of nearly $2.6 billion that will be added to the total of $3.2 billion it received since the loan program was agreed upon in 2022. 

An amount of nearly $2.2 billion remains in the US$8 billion Extended Facility program — which the IMF offers to countries facing a balance of payments pressure — and is set to reach its end in Autumn 2026. 

The country also passed the first review under the Resilience and Sustainability Facility (RSF), the statement added. 

The RSF loan program, agreed upon in March, is valued at $1.3 billion to be disbursed over several tranches and aims to support countries facing climate and pandemic-related threats. 

In its statement, the fund praised the Egyptian economy’s performance, namely regarding stability of its macroeconomic indicators and slowed down inflation, noting that the economy is showing “signs of robust growth.” 

According to the IMF, growth rates rose to 4.4 percent in fiscal year 2024/25, compared to 2.4 percent in the previous year, with improved performance in the sectors of non-oil manufacturing, transportation, finance and tourism being behind recovery. 

Economic activity further improved in the first quarter of the current fiscal year 2025/26, reaching 5.3 percent on a year-on-year basis, the statement added. 

The fund also stated that the balance of payments has “ improved markedly, despite adverse external developments,” adding that the improved performance concerned, in particular, the narrowing of the current account deficit, with remittances from expats and tourism revenues remaining strong, and non-oil exports witnessing high rates of growth.  

External financial conditions eased significantly in 2025, the IMF added, with the stock of non-resident inflows into local-currency debt rising to around $30 billion, and foreign currency reserves reaching $56.9 billion. 

According to the fund, the central bank’s maintenance of an “appropriately tight” monetary policy contributed to the inflation slowdown, and pursued a “cautious and gradual" monetary easing to support the declining inflation rates.

Regarding fiscal indicators, the IMF said that “fiscal discipline” supported the strong tax revenue performance, though noted that Egypt’s fiscal policy needs to continue to reduce debt, while maintaining and prioritizing social spending, with the aim of protecting vulnerable groups. 

During its visit to Cairo earlier this month, the IMF delegation put the state’s over-reliance on short-term borrowing, or hot money,  for current account liquidity on the discussions agenda. Hot money inflows hit new highs in the past period, reaching LE875 billion ($42 billion at current exchange rates) in 2024, with sources speaking to Mada Masr in recent months estimating that the figure reached around $50 billion, as Egyptian government debt currently offers one of the highest real rates of return on investment globally, at around 10 percent.

Noting that the Egyptian state committed to maintaining financial discipline, the fund added that the government is targeting a primary surplus of 4.8 percent of the GDP in the current fiscal year, and a 5 percent surplus in the coming fiscal year, predicting for the Cabinet to approve a package of “growth friendly” tax reforms in January 2026 that are expected to increase tax collections by nearly 1 percent of GDP in the coming fiscal year.

Also praised were efforts to facilitate trade activities and streamline tax-related procedures, which the IMF noted was “welcomed by the private sector.”

While the IMF Mission Chief for Egypt, Ivanna Vladkova Hollar — who visited from December 1 to December 11 — noted in her statement later that the Egyptian General Petroleum Corporation (EGPC) “remains a source of financial threat,” and that “achieving cost recovery for products subject to the automatic fuel pricing mechanism” improved its performance, in reference to the latest fuel prices hike in October, the second increase this year. 

On social spending, the statement said that Egyptian authorities “reiterated their commitment” to increase allocations to the cash transfer program (Takaful and Karama), as well as to its human capital development programs, amid  other targeted social protection measures and programs. 

From its side, the fund recommended that Egypt further increases the budgetary allocations to these programs. 

The IMF concluded its statement by noting that the Egyptian government has already implemented two key measures related to the mitigation of climate change effects — as part of the additional US $1.3 billion RSF program.

The measures, listed in the statement, are the publishing of a schedule outlining the implementation plan to achieve renewable energy targets, as well as climate finance — which the IMF said was a directive issued by the central bank to report and monitor and report exposure to firms that may face material transition risks from the adoption of the Carbon Border Adjustment Mechanism.

Egypt began negotiating with the IMF at the end of 2022 for a $3 billion loan. The program faltered for months before talks resumed, with the two sides ultimately agreeing to augment the loan to $8 billion and approving four reviews. 

Egypt and the fund previously agreed to a loan program in 2016, which hastened a government-led austerity program in exchange for $12 billion and was also highlighted by the government’s reluctance to withdraw from the national economy.