IMF says Egypt’s economy withstood wartime shocks — Asharq Al-Awsat
The International Monetary Fund stated that Egypt managed to withstand one of the largest economic shocks in the region without a major downturn. This was supported by an increase in international reserves, a more flexible exchange rate and a swift economic policy response, Asharq Al-Awsat reports.
Financial market reaction
IMF analysts Amin Mati and Eugenia Kournienko noted that reforms under the fund’s program supported growth, helped slow inflation and improved banks’ positions in foreign assets. At the same time, financial markets reacted sharply to the regional conflict: non-residents’ investments in Egypt’s local-currency government bonds fell from $39.1 billion in February to $22.2 billion at the beginning of April.
The Egyptian pound depreciated by approximately 14–17% during this period. After pressure eased, portfolio investments began to return, and the volume of non-residents’ investments almost recovered to the level seen before the conflict. The pound’s exchange rate also recouped a significant share of its initial losses.
Growth and inflation
According to the IMF’s assessment, the financial shock did not turn into a broad economic downturn. In the third quarter of the 2025/26 fiscal year, economic growth stood at 5%. The tourism sector remained resilient, remittances reached a record level, and operations of the Suez Canal were gradually recovering after temporary disruptions amid regional instability.
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Inflation rose due to the pound’s devaluation and energy price adjustments, but the increase was smaller than expected. A return to the inflation target, according to the fund’s assessment, has been postponed by one year. International reserves, meanwhile, remained at an adequate level despite the initial capital outflow.
Debt risks
The IMF stressed that Egypt still has significant vulnerabilities: high public debt, substantial financing needs and considerable dependence on short-term borrowing. Gross financing needs in the near term are projected to amount to about 40% of GDP and will only gradually decline to less than 30% of GDP by 2030.
The fund also pointed to banks’ high exposure to the state and the large role of the public sector in the economy. To reduce risks, the IMF recommends extending borrowing maturities, broadening the investor base, developing the domestic debt market, more decisively implementing the state ownership policy and asset divestment program, and strengthening competition.
