Documents from the seventh review of Egypt’s economic reform program at the International Monetary Fund have revealed new expectations for the trajectory of the Egyptian economy.
Inflation and growth rate: IMF forecasts for the future of the Egyptian economy
The documents confirmed the Egyptian economy’s ability to withstand the repercussions of regional tensions and rising energy prices, with expectations of rising inflation in the short term before it gradually declines again, along with improved indicators of debt, reserves, tourism revenues and the Suez Canal.
The IMF expects average inflation to rise to 16.7% during the second half of the current fiscal year, driven by increases in energy prices, base year effects and the decline in the exchange rate of the pound, before slowing down to about 13.2% by the end of the current fiscal year, and then gradually decreasing to 5.3% by the end of fiscal year 2030-2031.
The IMF noted that the return of capital flows and an improved exchange rate, along with the continuation of a tight monetary policy, will support the path to reducing inflation, but reaching the central bank’s target range may be delayed for a year due to the repercussions of the war and adjustments to energy prices related to the automatic fuel pricing mechanism.
The fund explained that real GDP grew by 5% during the third quarter of the 2025-2026 fiscal year, supported by the Suez Canal, tourism and construction sectors, along with the continued growth of non-oil manufacturing industries, while growth during the first nine months reached 5.2%.
The IMF expects the economy to grow by about 4.6% during the 2025-2026 fiscal year, before slowing to 4.4% in 2026-2027, as a result of the war’s impact on investments, production and financing costs and uncertainty, in addition to private consumption being affected by rising inflation and declining purchasing power.
The IMF forecasts that public debt will rise to 82.2% of GDP in 2026-2027, before gradually declining to 70.8% by 2030-2031, in line with recommendations to continue fiscal consolidation, increase revenues, reduce financing needs, and improve debt management.
Foreign exchange reserves are also expected to rise to $67.5 billion during the current fiscal year, reaching approximately $72.9 billion in 2030-2031.
The IMF expects Suez Canal revenues to rise to $4.9 billion during the current fiscal year, reaching $11 billion in 2030-2031, while tourism revenues will rise from $20.8 billion currently to about $29.8 billion during the 2030-2031 fiscal year.
The IMF expects foreign direct investment flows to Egypt to decline by about 13% during the next fiscal year compared to its pre-war forecasts, due to risks associated with regional tensions, with flows expected to recover as the effects of the crisis subside.
Conversely, the IMF expects remittances from Egyptians working abroad to remain strong, after reaching record levels, along with a gradual improvement in the current account deficit driven by an improved trade balance, growth in the services surplus, and stable oil and gas prices.
The IMF recommended continuing to tighten monetary policy to maintain a path of reducing inflation, keeping the exchange rate flexible, along with continuing fiscal consolidation and reducing debt and financing needs.
He also stressed the need to accelerate structural reforms, strengthen the role of the private sector, expedite the government offerings program, implement the updated state ownership policy, and improve the governance of state-owned enterprises and the business environment, in order to support stronger and more resilient economic growth.
The completion of the seventh review of the Extended Fund Facility (EFF) and the second review under the Resilience and Sustainability Facility (RSF) will enable Egypt to access approximately $1.5 billion from the EFF and $272 million from the RSF, bringing the total financing made available by the IMF to Egypt under the two programs to approximately $7.3 billion.
