Egypt's Inflation Has Been Cut Nearly in Half. The IMF Just Released Another $2.3 Billion to Keep It Going.
Egypt's economic reform programme reached a significant milestone in February 2026, when the IMF Executive Board completed combined reviews of the country's Extended Fund Facility and approved release of approximately $2.3 billion in additional financing, bringing total disbursements under the programme to about $5.2 billion.
The numbers behind that decision tell a genuine turnaround story. Real GDP growth reached 4.4% in the fiscal year ending mid 2025, described by the IMF as a broad-based recovery. Inflation, which averaged a punishing 20.4% across that same fiscal year, fell sharply to 11.9% by January 2026. Egypt's net international reserves climbed to a historic $52.6 billion in January, the highest level in over two decades.
The mechanism behind the disinflation was a combination of a flexible exchange rate, sustained interest rate hikes, and tight fiscal policy. The IMF noted that the adoption of a flexible exchange rate closed the gap between official and parallel market rates, cleared a backlog of import requests, and helped sustain strong inflows from tourism and remittances. The Egyptian pound reached its strongest level of the year on the back of falling global oil prices earlier in 2026, higher exports, and increased tourism revenue.
Forward looking forecasts remain encouraging. Interest rates, which stood near 21% at the end of 2025, are projected to fall toward 11.25% by the end of 2026 as disinflation continues, with average economic growth of 4.3% to 5% projected annually between 2027 and 2034.
The IMF's assessment was not without caveats. It explicitly flagged that progress on reducing the state's footprint in the economy, particularly the divestment of state-owned assets that forms a centerpiece of the loan agreement, has been slower than originally planned. High public debt and elevated financing needs continue to constrain how much fiscal space the government actually has. Heightened regional tensions and tighter global financial conditions also remain significant downside risks for a country whose Suez Canal revenue is directly exposed to shipping disruptions in the Red Sea.
