Egypt government committed to economic reform - Economy - Al-Ahram Weekly

Al-Ahram Weekly

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Egypt's economy expanded by 4.8 per cent in the third quarter of fiscal year 2024-25, up from 4.2 per cent in the first nine months and 2.4 per cent at the start of the fiscal year, Finance Minister Ahmed Kouchouk told a seminar on 'Fiscal Policy Between Financing Challenges and Growth Aspirations' organised by the Egypt-Canada Business Council and the Egyptian Business Council for International Cooperation on Monday.
Last week, Kouchouk told participants during the opening session of the 'Egypt Day' at the London Stock Exchange in the UK that the country's primary surplus had reached 3.6 per cent in fiscal year 2024-25, the highest ever recorded, with a 35 per cent growth in tax revenues.
He said the figures were the outcome of Egypt's solid fiscal performance. Delivering a presentation about the country's macroeconomic outlook, he said that taxes had not been increased or new ones imposed. The increased revenue was possible because of facilitations, broadening the tax base, digitisation, and building trust, the minister said.
Given the improved revenues, Kouchouk said that next year he hopes to triple allocations supporting the economy, double export funding, and launch more initiatives supporting the industrial and tourism sectors and entrepreneurship.
He said this was possible despite the headwinds that had affected Suez Canal revenues and an oil sector that needed support to rebound. He said he was confident that the country would meet its key economic reform targets and have a delayed review of its $8 billion International Monetary Fund (IMF) programme completed by September or October, according to Reuters.
According to the news agency, Kouchouk said he expected the government to complete three to four privatisations across various sectors before the end of the current fiscal year 2025-26. He said the government had shared a medium-term plan for these with the IMF and international institutions.
The fifth review of Egypt's $8 billion Extended Fund Facility programme by the IMF has been delayed due to slow progress on reforms such as divesting state assets and reducing the footprint of the government in the economy.
This meant that Egypt would not receive the fifth tranche of $1.2 billion that was set to be release by the IMF following the review. However, once Egypt passes the combined fifth and sixth review scheduled for this autumn, it should receive $2.5 billion.
Prime Minister Mustafa Madbouli had previously referred to the regional and global turmoil and its effects on the investment climate and the movement of capital in explaining the delays, indicating that these conditions had not been favourable to the sale of stakes in state-owned companies.
At a recent press conference, he affirmed that selling stakes in state-owned companies was important for the government. He said that the IMF had not asked the state to offer stakes in specific sectors or companies, affirming that the decision was 100 per cent Egyptian, and that the delays were due to the state's target of achieving a specific return from the offering of the assets.
If this return is not achieved, the offering is postponed to a more suitable time, he explained.
In November 2024, Madbouli said that the government was planning to offer stakes in 10 state-owned companies in 2025, including four military-owned companies and banks. The list also included companies in the pharmaceuticals sector.
Moreover, the government said it would privatise the management of Egypt's airports at a recent press conference, with Madbouli explaining that this involves offering the management and operation of the airports to specialised global companies.
He said that the return generated by these companies in managing the airports would represent a higher value than what would be achieved through state management.
In the meantime, the IMF released its report on the fourth review of Egypt's reform programme that took place earlier this year.
According to the IMF report, the government has made progress in stabilising the economy. However, it said that going forward 'it is critical not only to consolidate these short-term gains but also accelerate the implementation of structural reforms.'
The fourth review gives a glimmer of hope, said Hesham Shafick, assistant professor of strategic management at the German International University (GIU) in Cairo, citing it as acknowledging that inflation had cooled to around 24 per cent compared to a peak of 38 per cent and that GDP growth is recovering and reserves have accumulated quicker than expected.
Quarterly real GDP growth picked up to 3.5 per cent in the first quarter of fiscal year 2024-25 compared to 2.7 per cent the same time the year before. Net international reserves reached $48.7 billion at the end of June 2025, according to the Central Bank of Egypt (CBE).
However, Shafick said that some of the challenges mentioned by the report remain the same as those mentioned by the IMF since day one of the agreement, namely that the government needs to take a back seat in the economy and allow the private sector more room to operate.
The fourth review report said that 'deeper reforms are required to unlock Egypt's growth potential, sustainably reduce its vulnerabilities, and meet its economic and social needs.'
Reducing the role of the public sector in the economy is an urgent priority, the report stressed. It listed essential reforms such as developing a financial system that supports private-sector development, strengthening the competitiveness of the economy, and levelling the playing field and reducing red tape.
According to Shafick, the economy continues to depend on piecemeal solutions such as the sale of assets or loans, while real recovery requires shrinking the state's role in non-strategic sectors and encouraging private-sector investment inflow in productive sectors.
He said that while the government appears to be serious about clearing the way for private-sector activity, it needs to take steps on the ground such as issuing new legislation that will create an ecosystem that would attract the private sector.
The private sector wants to make sure that it will be competing on equal terms with other players in the market, Shafick said.
Economist Moataz Yeken said in a post on his Linkedin page that Egypt's macroeconomic indicators may be stabilising on the surface, thanks to hefty foreign currency inflows from Gulf allies, proceeds from the Ras Al-Hekma deal, and multilateral support, but the real economy remains constrained.
He also noted that progress on the State Ownership Policy and public-asset divestment has been limited.
'While Egypt has demonstrated resilience in the face of external shocks, from Covid-19 to war-induced commodity disruptions, the model of stabilisation through foreign borrowing and asset monetisation is not a substitute for structural reform. It buys time, not sustainability,' Yeken wrote.
Nonetheless, the IMF's continued support is not in doubt. According to Shafick, Egypt's geopolitical status will shield it against any fallout from the IMF's decision to delay the fifth review and the accompanying disbursement of funds, especially if it moves faster with reforms.
Earlier this month, the US ratings agency Moody's kept Egypt's outlook positive and affirmed its Caa1 rating. The agency said its outlook 'reflects the prospect for an easing of Egypt's debt service burden… and increasing monetary policy credibility and effectiveness.'
Yeken said that 'the IMF's continued support is not in question. Egypt remains geopolitically strategic.' However, he stressed that 'Egypt's own long-term stability hinges on a genuine pivot away from state-led commercial expansion and toward a rules-based, competitive market economy.'
Attracting foreign direct investments (FDI) and selling stakes in state-owned companies is crucial not only for the growth of the economy but also to bring in revenue to bridge Egypt's financing gap.
In the fourth review report, the IMF estimated the financing gap at $8.2 billion in 2025-26. To help bridge that gap, bond issuances are in order. Kouchouk said that there are plans to issue up to $4 billion of various types of bonds. Last month, $1 billion worth of sovereign sukuk (Islamic bonds) was issued.
Though these issuances have raised concerns about growing external debt, the government has said it is part of a strategy to extend the maturity of its debt.
The IMF puts Egypt's external debt at reaching around $180 billion in the current fiscal year, with external debt servicing amounting to $46.6 billion.
During his meeting in London last week, the minister said the government was implementing an integrated strategy to improve public debt indicators and maintain investor confidence.
During the seminar on Monday, he said the government had already begun reducing the country's debt-to-GDP ratio, targeting overall improvements in all economic indicators over the coming period. He added that the government remains committed to reducing external debt-servicing obligations for all budget entities by $1 to $2 billion annually.
* A version of this article appears in print in the 24 July, 2025 edition of Al-Ahram Weekly
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