Egypt Made Progress on Its Economic Reforms Amid Regional, Int'l Challenges

The Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva, highlighted that Egypt's reforms are intended to address the country's economic challenges as she discussed ways to help the country amid hard regional and international challenges.

Managing Director Georgieva spoke to Al-Ahram on the eve of her visit to Cairo, which starts.

What are you hoping for from your visit to Egypt? Visiting Egypt is always a great learning experience and a chance to engage on top-of-mind issues for the country, the region, and the world. Last time I had the pleasure to come here, it was to participate in the climate discussions during COP27 in 2022.

But I return at a difficult moment for the country and the region more broadly. Conflicts in the region are causing an immense humanitarian toll and severe damage to infrastructure.

Their impact is felt across many countries, weighing heavily—on the people and the economy. My heart goes out to all those who are suffering the dire consequences of the fighting.

The focus of my trip is to address the economic challenges facing Egypt and the rest of the region, as well as to discuss ways to unlock Egypt’s tremendous potential.

I also hope to hear views on how the IMF can continue to serve and support Egypt. We know that our members’ needs are evolving in a rapidly changing world, and we are continuously adapting to meet those needs.

As you know, the IMF has enhanced support for Egypt in the last few years in light of the multiple shocks Egypt has gone through, including the regional conflict.

In March, the current program was augmented from $3 billion to $8 billion to help Egypt’s economy stabilize and get on a path towards resilience and growth.

For all countries, including Egypt, low growth and high debt is an unforgiving combination. Weak medium-term global growth projections—at 3.1 percent—will not be enough to eradicate poverty, create much-needed jobs, and enable adequate investment in infrastructure and the fight against climate change.

In terms of fiscal policy here in Egypt, maintaining discipline and transparency while ensuring adequate social protection spending is essential. More tax revenue mobilization will be key to helping support this effort, as it will help create space for priority spending and for targeted support for the vulnerable.

Proceeds from the ongoing state asset divestiture program will help reduce public debt further.

The key to enhancing economic growth that benefits all Egyptians lies in implementing needed reforms. Policies that help people benefit from the green and digital transitions, improve competition and resource allocation to create better jobs, reduce inequality, and bring in more private capital to invest in Egypt are essential. Now is the time to implement them.

The IMF just announced reforms to surcharges to reduce the burden on servicing loans. How would this benefit emerging markets, particularly Egypt and the region?

With crisis upon crisis buffeting the global economy, record numbers of countries have accessed IMF lending. But as global interest rates have risen sharply, so too has the cost of borrowing.

This prompted us to review our charges and surcharge policies—to explore how we could lower the cost of borrowing for the countries that need it while preserving the financial strength that allows us to serve our membership.

The new reforms, announced a few weeks ago, were unanimously agreed upon by our Executive Board and are expected to lower borrowing costs on account of the margin of charge and surcharges by about $1.2 billion annually—a 36 percent reduction.

For Egypt, the change in the charges and surcharges policy is projected to reduce payments by around $800 million by the end of the decade.

This is a significant relief for the country, and I have no doubt it will be used wisely for priority needs.

We're almost halfway through the program: how do you assess Egypt's progression and commitments towards the quantitative targets so far, seeing the circumstances?

Egypt has been making progress on its economic reform program, even in a very challenging regional environment. Let me highlight a few key areas.

First, while inflation is still high, the peak is behind us. Second, the currency has gone through a period of depreciation, but the widespread shortages and speculation are also behind us.

Third, the very significant investment in Ras El-Hekma shows the potential to attract strong interest in developing the country, and the fact that a significant portion of these proceeds were used prudently has helped—reserves are significantly stronger, and debt has come down.

Egypt has been able to strengthen some of its economic indicators despite the challenging regional environment. We hope to see this progress continue and expand to other areas, particularly to lasting structural reforms.

How do you see the external challenges impacting Egypt and its ability to make reforms?

The conflict in the region has been devastating from a humanitarian perspective and very damaging economically, especially for countries at the very epicenter but also for neighboring countries like Egypt. The disruption of trade through the Red Sea has impacted Suez Canal operations and revenues. Revenues collected from the Suez Canal are down 70 percent on pre-conflict levels, affecting foreign exchange inflows, budget revenue, and growth.

But it is precisely because of these challenges that moving forward with reforms is so necessary to tap new sources of growth. For example, improving the business environment can help attract more private investment.

Think of faster business start-up timelines, greater transparency, fewer regulatory burdens, increased access to finance, and digitalized tax payment systems. All of these can help firms increase their confidence, grow their business, hire more people, and invest more in Egypt.

The IMF urges Egypt to maintain a flexible exchange rate regime and a liberalized foreign exchange system to avoid a buildup of external imbalances. What does this mean for the Egyptian pound?

The purpose of exchange rate flexibility is to protect the Egyptian economy from external shocks and ensure that foreign exchange is available to everyone at the same price. In a system where the price adjusts to supply and demand conditions, there are no shortages, and the exchange rate would move up and down in response to supply and demand changes.

This is in contrast to a system where when the exchange rate is kept stable, imbalances start building up, ultimately leading to a large depreciation.

The result, as we have seen in Egypt in the past, is that a parallel market emerges, making it difficult for people to have access to foreign exchange and creating distortions. Everybody has their mind set on obtaining dollars, often at a significant cost.

There is little incentive to invest in the productive capacity of the economy.

This is precisely what we want to avoid, and this is why we advise that the right course of action is to maintain a flexible exchange rate regime and a liberalized foreign exchange system.

We are seeing that inflation is coming down steadily globally, but it is still high in some countries in the region, including Egypt. How can Egypt mitigate the effect of the various reforms on inflation and the increasing cost of living? Indeed, the big wave of global inflation is in retreat. For many countries, that is a sign to start shifting gears on monetary policy. But for countries where inflation is still high, like Egypt, bringing it down remains a big priority.

This is why the Central Bank of Egypt’s decision to tighten monetary policy and remain cautious about starting the easing cycle has been an appropriate response. If inflation doesn’t come down as expected, it will be important to understand why and act swiftly to ensure that it does.

People are feeling the effects of higher prices in their wallets. And inflation always hits the poor the hardest. Well-designed, adequately resourced social programs are essential to protecting the most vulnerable.

Let me outline three priorities for Egypt’s economy in 2026: First, lower inflation. High inflation is eroding Egyptians’ purchasing power.

Second, reduce debt. Egypt, like many other countries, faces growing spending demands—including health, education, social safety nets, the green transition, and the digital transformation.

And as the last few years have proved, we are living in a shock-prone world. Creating fiscal space will be essential to build resilience against future shocks and invest in Egyptians’ futures.

Third, create conditions for higher growth. With a level playing field, the private sector can help jumpstart productivity, which is so important to sustain growth and create high-quality jobs.

I have high hopes that with the right steps, this vision for Egypt’s economy in 2026 can be achieved.

What is your message to the Egyptian people? My message is this: opportunity awaits. Egypt has a remarkable history and a promising future, which is in the hands of its young and growing population.

The IMF will continue to support Egypt to seize the opportunity to build that promising future.