IMF says it is releasing $2.3 billion to Egypt after reforms help to stabilize the economy

IMF Approves $2.3 Billion in Funding as Egypt Shows Signs of Economic Recovery

The International Monetary Fund has released approximately $2.3 billion to Egypt following a review of the country’s ongoing economic reforms, citing progress in stabilizing the economy and reducing inflation. The decision marks another milestone in Egypt’s challenging journey toward financial stability.

“Egypt has shown a broad-based economic recovery,” the IMF stated on Wednesday, highlighting the country’s GDP growth rate of 4.4% for 2024-2025. The organization acknowledged significant improvements in controlling inflation, which has fallen dramatically from its peak of 38% in September 2023 to 11.9% in January of this year.

The newly approved funding is part of an expanded bailout package that grew from an initial $3 billion approved in 2022 to $8 billion in 2024. This expansion came in response to Egypt’s severe foreign currency shortage and spiraling inflation that threatened economic stability in the Arab world’s most populous nation.

Egypt has implemented several difficult economic measures to qualify for the IMF support, including floating the Egyptian pound—allowing its value to be determined by market forces rather than government controls—and implementing significant interest rate hikes. These policies, while painful for many Egyptians in the short term, have helped bring inflation under control.

However, the IMF tempered its positive assessment by noting that progress “has been uneven.” The international lender specifically pointed to the outsized role of the state in Egypt’s economy as an ongoing concern, emphasizing that “decisive efforts to reduce the state’s footprint in the economy will be essential” for sustained growth and stability.

The Egyptian economy has weathered multiple severe external shocks in recent years. The COVID-19 pandemic dealt a heavy blow to tourism, one of Egypt’s crucial foreign currency sources. This was followed by economic fallout from Russia’s invasion of Ukraine, which disrupted global food supplies and sent wheat prices soaring—a particular concern for Egypt, which is the world’s largest wheat importer.

More recently, the Israel-Hamas war in Gaza has created additional economic pressure and regional instability. Adding to these challenges, Houthi rebel attacks on shipping in the Red Sea have forced vessels to avoid the Suez Canal, resulting in a significant decline in canal revenues—another vital source of foreign currency for Egypt.

The canal, which connects the Mediterranean Sea to the Red Sea, normally facilitates about 12% of global trade. The diversion of shipping traffic around the southern tip of Africa has not only reduced Egypt’s income but also disrupted global supply chains and increased shipping costs worldwide.

These compounding crises have exacerbated existing economic hardships for ordinary Egyptians. According to the latest government figures, approximately 30% of Egypt’s population of more than 108 million lives below the poverty line, highlighting the human dimension of the country’s economic struggles.

Economic analysts note that while the IMF support provides critical financial breathing room, Egypt faces significant long-term challenges. The country must balance implementing further market reforms with providing adequate social protection for its vulnerable populations.

The Egyptian government has stated its commitment to continuing structural reforms while working to attract foreign investment and diversify its economy beyond traditional sectors. However, reducing state control over key industries remains politically sensitive, as these enterprises provide employment for millions of Egyptians.

As Egypt moves forward with its reform program, the success of these measures will largely depend on the government’s ability to create a more dynamic private sector while managing the social impact of economic transition during a period of regional uncertainty.