Egypt expects agreement on IMF program reviews by October

Egypt expects agreement on IMF program reviews by October

Egypt is poised to finalize its IMF program reviews by October, aiming to address concerns raised by the international financier over military involvement in the economy and the pace of privatization efforts. The latest IMF report, released on July 15, 2025, highlighted several key issues and recommended corrective measures [1].

The report underscored the need to reduce Egypt’s state involvement in the economy, particularly the military's expanding footprint. The IMF noted that the military owns 97 companies, 73 of which are in the industrial sector, and that these companies hold significant market shares in several non-military sectors. The commercial reach of these companies has expanded significantly in recent years, with notable acquisitions in the hospitality, energy, utility, and steel sectors [1].

Privatization efforts have been a central focus of the IMF's recommendations. The report criticized the slow progress in divesting state-owned companies, with only nine out of 35 announced companies being partially or fully divested in 2024. The IMF projected foreign currency inflows from privatization to drop sharply from a projected US$3 billion to just $600 million by the end of the fourth review for fiscal year 2024/25 [1].

In response, Egypt and the IMF agreed to a revised timeline for privatization revenues over the remaining two years of the program. The new plan aims to generate $3 billion in foreign currency during FY 2025/26, all of which will go toward reducing public debt, followed by $2.1 billion in the final year. This includes the privatization of two banks and four military-owned firms through listings on the Egyptian Exchange [1].

The IMF also expressed concerns about central bank lending to state entities and the fiscal risks associated with off-budget financial operations. The report flagged the Egyptian General Petroleum Corporation (EGPC) as a major source of fiscal vulnerability, noting that government guarantees for the corporation amounted to around 18 percent of Egypt’s GDP. The EGPC’s outstanding arrears are estimated at $3 billion to $4 billion, with the report linking the issue to the decline in oil and gas production since 2022 [1].

To address these challenges, Egypt has committed to a comprehensive restructuring plan for the EGPC, which includes a defined timeline and updated energy price increases. The government has also agreed to a Cabinet decision to freeze the short-term deposits of the New Urban Communities Authority (NUCA), worth around LE500 billion, in the Treasury Single Account for three years [1].

The IMF's fourth review also noted that Egypt's external financing needs are projected to increase due to regional tensions, with the financing gap expected to nearly double in FY2026/2027 compared to FY2024/2025. The primary surplus target for FY2024/2025 remains at 3.5 percent of GDP (excluding divestment proceeds), aligning with the IMF's recommendations [2].

Egypt is expected to complete both the fifth and sixth reviews by September, with the upcoming review set to be completed on September 15, 2025, and the remaining two reviews scheduled for March and September 2026 [2]. The successful completion of these reviews will be crucial for Egypt to secure the necessary external financing and address the challenges highlighted in the IMF's latest report.

References:
[1] https://www.madamasr.com/en/2025/07/17/news/u/imf-presses-egypt-on-privatization-state-lending/
[2] https://english.ahram.org.eg/News/549691.aspx