The International Monetary Fund (IMF) has raised Egypt's economic growth forecast for fiscal year 2024/25 to 3.8 per cent, reflecting stronger-than-expected performance in the first half of the year and a surge in private sector activity.
The revised outlook follows the conclusion of an IMF staff mission to Cairo, held from May 6 to 18, as part of the Fifth Review under the Extended Fund Facility (EFF).
Private Sector Investments
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According to mission chief Ivanna Vladkova Hollar, "Egypt has made substantial progress towards macroeconomic stability," with the economy showing clear signs of recovery.
Private sector investment, in particular, saw a notable increase, rising from 38.5 per cent of total investment in H1 FY2023/24 to almost 60 per cent in the corresponding period of FY2024/25.
Despite a slight rise in inflation to 13.9 per cent in April, the Fund noted that price pressures remain on a downward trend. However, challenges persist. "The current account remains wide," Hollar said, attributing the gap to "rising imports, reduced hydrocarbon output, and Suez Canal disruptions," which have offset gains from tourism, remittances, and non-oil exports.
Public Spending
On the fiscal front, the IMF welcomed the Egyptian authorities' commitment to discipline, especially through improved oversight of large public sector infrastructure projects. Public investment spending, it noted, remained below the ceiling set for July to December 2024. Furthermore, the fund praised recent efforts to improve tax and customs administration, stating, "We welcome the authorities' recent efforts to modernize and streamline tax and customs procedures to increase efficiency and build confidence."
Nevertheless, the IMF emphasized that more needs to be done to strengthen Egypt's economic foundations. "With the macroeconomic stabilization now underway," Hollar said, "it is critical for Egypt to carry out deeper reforms to unlock the country's growth potential, create high-quality jobs, and sustainably reduce its vulnerabilities."
Public Sector Role
In particular, the fund stressed the importance of reducing the state's footprint in the economy. "Decisively reducing the role of the public sector and leveling the playing field for all economic agents should be key policy priorities," Hollar added, highlighting the role of the State Ownership Policy and the asset divestment programme in enabling private sector-led growth.
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As discussions now shift to a virtual format, the IMF confirmed that work is continuing to finalize agreement on the remaining policies and reforms needed to complete the fifth review.
Amwal Al Ghad
