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Washington, DC: An International Monetary Fund (IMF) mission team led by Ms. Vladkova Hollar visited Cairo from December 1-11 and held productive virtual discussions with the Egyptian authorities thereafter on a package of economic and financial policies that could underpin the completion of the Fifth and Sixth reviews under the Extended Fund Facility (EFF) arrangement, and first review under the Resilience and Sustainability Facility (RSF).  

At the conclusion of the discussions, Ms. Vladkova Hollar issued the following statement: 

”The IMF team and the Egyptian authorities have reached staff level agreement on the fifth and sixth reviews under the Extended Fund Facility (EFF) arrangement and the first review under the Resilience and Sustainability Facility (RSF). 

“Stabilization efforts have delivered important gains and the Egyptian economy is showing signs of robust growth. This stability has been achieved amid a challenging regional security environment and heightened global uncertainty. Economic activity picked up to 4.4 percent in FY 2024/25, from 2.4 percent the previous year. The recovery was broad-based, supported by robust performance in non-oil manufacturing, transportation, finance and tourism. Economic activity accelerated further in Q1 FY2025/26, reaching 5.3 percent (y/y). 

“The balance of payments has improved markedly, despite adverse external developments. In particular, the current account deficit narrowed, as both remittances and tourism receipts remained buoyant, and non-oil exports registered strong growth. External financial conditions eased significantly in 2025, with the stock of non-resident inflows into local-currency debt rising to around USD 30bn, and foreign currency reserves reaching USD 56.9bn. 

“Fiscal performance has remained robust, with a primary balance surplus of 3.5 percent of GDP in FY 24/25. Despite strong performance of tax revenues that grew by 36 percent in FY 2024/2025 and 35 percent during July-November 2025/26, through reforms to widen the tax base, improve voluntary tax compliance, and streamline exemptions. The tax-to-GDP ratio remained at modest levels by international standards in FY24/25 (12.2 percent of GDP). Thus, continued efforts are needed to close the tax-to-GDP gap and place gross budget sector debt on a firm downward path while safeguarding targeted social spending.

“The central bank of Egypt (CBE) has maintained an appropriately tight monetary policy stance, pursuing a cautious and gradual monetary easing to sustain disinflation efforts. Going forward, this careful management of the easing cycle should continue, as month-on-month inflation readings suggest that disinflationary pressures are not yet firmly entrenched. Headline urban inflation edged up slightly to 12.3 percent (y/y) in November after hitting a 40-month low in September. This is the result of tight fiscal and monetary policies, the elimination of FX shortages, and the dissipating impact of earlier exchange rate depreciation.

“The large presence of state-owned banks in the financial system requires continued robust governance practices to maintain financial health, strengthen a market-based transmission mechanism for monetary policy, and promote competition in the banking sector. To that end, the CBE is committed to follow through on the initiated third-party reviews to ensure that best practices are followed.   

“The authorities reiterated their commitment to maintain fiscal discipline, reduce gross financing needs, and place budget sector debt on a sustained downward path. In this regard, they are targeting a primary balance surplus (including net acquisition of financial assets) of 4.8 percent of GDP this fiscal year, and 5 percent of GDP in FY 26/27. The cabinet is also expected to approve a growth-friendly package of tax reforms in January 2026 to increase tax collections by about one percent of GDP next fiscal year. While EGPC’s financial position remains a source of fiscal risk, recent measures have contributed to improving its finances, including by reaching cost recovery on products covered by the retail fuel indexation mechanism. The authorities also reiterated their commitment to increasing allocations to the conditional cash transfer program (Takaful and Karama) along with human capital and other targeted social protection measures and programs. Given the importance of these programs, the mission suggested that consideration be given to increasing further the budgetary envelope allocated to these areas. 

“With the macroeconomic stabilization now underway, it is critical for Egypt to transition toward a more sustainable economic model through the acceleration of reforms that would provide the private sector the space and the opportunity to flourish. In this context, the authorities and IMF team discussed the objectives of the National Narrative for Economic Development, which prioritizes a reform agenda aimed at transforming Egypt’s growth model toward a more competitive, private sector driven economy. The authorities have also taken steps to improve the ease of doing business, especially on trade facilitation and streamlining tax related procedures, where private sector participants have acknowledged the results already achieved in this area. Going forward, efforts to reduce the role of the state need to be accelerated. This includes significant further progress with the divestment agenda, and additional efforts to level the playing field, and avoiding the establishment or expansion of activities of existing SOEs and other economic authorities. 

“Reforms related to the Resilience and Sustainability Facility (RSF) are on track, and the authorities have already implemented two key measures related to mitigation (i.e. publishing of a schedule outlining the implementation plan to achieve renewable energy targets), and climate finance (directive issued by CBE to mandate banks to monitor and report exposure to firms that may face material transition risks from the adoption of the Carbon Border Adjustment Mechanism). The authorities are also making good progress toward delivering on the remainder of the reform measures. 

“The IMF team would like to express its gratitude to the Egyptian authorities for the constructive discussions and warm hospitality during the mission”.