Cairo: The International Monetary Fund (IMF) has raised significant concerns about Egypt’s ongoing economic reform program, noting that despite some stabilization, the country is falling short of key structural targets especially in curbing the outsized role of the state and military in the economy.
In its fourth review of Egypt’s $8 billion loan agreement, the IMF acknowledged progress in areas like currency flexibility and monetary tightening, but underscored that deeper, politically sensitive reforms remain stalled. Chief among these is the failure to meaningfully reduce state dominance and open up the economy to genuine private sector participation.
The report states that many state-owned and military-affiliated enterprises in Egypt continue to enjoy significant privileges, such as tax breaks, preferential access to land and credit, and exemptions from regulatory scrutiny. These advantages, coupled with a lack of financial transparency, are stifling competition and deterring private investment.
“Public sector-led growth focused on megaprojects and heavy infrastructure spending has crowded out private businesses,” the IMF observed. “The dominance of state entities remains a fundamental bottleneck to inclusive and sustainable development.”
Egypt’s external debt is projected to increase from $162.7 billion in 2024–25 to more than $202 billion by the end of the decade, according to the IMF. This escalation in borrowing is compounded by sharp revenue losses from disruptions in the Suez Canal and regional instability, notably the conflict in Sudan.
The Suez Canal alone, traditionally a reliable source of foreign exchange, saw a loss of nearly $6 billion in expected earnings due to Red Sea shipping interruptions. Meanwhile, inflation remains elevated and foreign reserves are under pressure despite some short-term stabilization.
Under its loan conditions, Egypt had pledged to increase the role of private enterprise and divest several state assets. Finance Minister Ahmed Kouchouk said on Wednesday that the government still intends to complete three to four privatization deals before the end of the current financial year, including offering stakes in military-owned firms via the Egyptian sovereign wealth fund.
Yet, the IMF warns that these efforts are moving too slowly and are not backed by a comprehensive policy shift. “More than isolated asset sales, what’s needed is systemic reform that establishes a level playing field,” the report emphasized.
In early July, the IMF announced it would combine Egypt’s fifth and sixth reviews, giving Cairo more time to meet its obligations. While this provides a temporary reprieve, it also reflects the Fund’s dissatisfaction with the pace of reform. Further disbursement of funds critical to Egypt’s liquidity needs will now hinge on the outcome of this combined assessment, expected by September or October.
“This is not just about ticking boxes,” said an IMF official. “What matters is whether the reforms have real substance, particularly around governance, transparency, and the private sector.”
Egypt’s leadership faces an unenviable balancing act: reduce state control and increase economic competitiveness, all while maintaining social stability amid rising living costs and regional instability. Many international observers warn that without bolder reform, Egypt risks repeating a pattern of short-term fixes without long-term economic transformation.
The IMF’s latest message is clear Egypt’s economic health depends not only on balancing budgets and securing loans but on fundamentally reimagining its economic governance. Unless the state relinquishes its grip on commerce and allows private businesses to flourish, the promise of reform may remain unfulfilled.