Egypt Daily News – The International Monetary Fund (IMF) has decided to merge the fifth and sixth reviews of Egypt’s extended loan program, primarily due to delays in the government’s privatization plans, according to Egyptian officials speaking to Asharq News.
IMF spokesperson Julie Kozack confirmed last week that both reviews would be conducted jointly in the fall, pushing back the disbursement of a new funding tranche that Cairo, burdened by debt, had been anticipating.
Missed Deadlines and Policy Delays
One senior Egyptian official noted that the IMF’s decision aims to “strengthen government commitment to the privatization program.” Another said that Cairo failed to meet the agreed timeline for implementing asset sales during the third quarter of the 2024–2025 fiscal year.
Officials now expect several state divestment deals to be completed in the third quarter of 2025, which would be crucial for the IMF’s combined review—likely to be concluded between September and October.
The Egyptian government has yet to release an updated version of its privatization roadmap, after responsibility for the file was transferred to Investment Minister Hassan El-Khatib. Notably, the planned sale of Banque du Caire to Emirates NBD stalled last month due to disagreements over valuation.
Currency Stability and Economic Outlook
Three government sources told Asharq that the decision to postpone the reviews is not expected to pressure the Egyptian pound. They cited stable foreign exchange reserves and improving hard currency inflows.
However, economist Mohamed Fouad argued the move signals weak progress in exiting state economic activity and opening space for the private sector. He also noted that the IMF views Egypt’s tax reforms as “administrative rather than structural,” falling short of goals like raising VAT revenues to 1% of GDP within a year.
Despite these concerns, Fouad also downplayed fears of currency devaluation, citing robust inflows from hot money, tourism recovery, and remittances. He estimated the exchange rate to remain between 48 and 50 EGP per USD in the near term.
Economist Medhat Nafei agreed the impact would be limited, noting global dollar weakness and the potential for a de-escalation in Gaza that could boost Suez Canal revenues.
VAT Amendments and Fiscal Pressures
As part of its commitments to the IMF, Egypt plans to amend its VAT law. The proposed changes include:
- A 23% increase in local and imported cigarette prices
- A 15% rise in alcohol taxes
- A new 10% tax on crude oil
- Restructuring alcohol taxes from percentage-based to fixed rates based on alcohol content
- Applying the standard 14% VAT rate to construction and contracting services, currently taxed at 5%
These measures aim to boost tax revenues without imposing additional burdens on lower-income citizens—roughly one-third of whom live below the poverty line.
Balance of Payments and EU Support at Risk
The delay in IMF disbursements will likely increase pressure on Egypt’s balance of payments. According to Fouad, the government relies on these funds to repay existing loans and to finance natural gas imports—estimated at $12 billion annually—to support electricity generation.
Fouad also warned that the delay could jeopardize the release of the European Union’s second financial support tranche, which is contingent on ongoing IMF cooperation.
In March 2024, Egypt reached a new agreement with the IMF to expand its support program from $3 billion to $8 billion. This unlocked additional investments and funding that helped stabilize the economy after years of turbulence.
By April 2025, the European Parliament approved the second tranche of a €5 billion macro-financial assistance package to Egypt. Cairo had already received €1 billion in December 2024, with the remaining €4 billion pending.
Hany Genena, Head of Research at Al Ahly Pharos Securities, said the delay will not have major negative consequences, noting that Egypt is still expected to receive $2.4 billion once the reviews are completed. “I don’t expect the pound to weaken,” he added.
This outlook aligns with the IMF’s own assessment. Kozack stated that the Fund’s mission to Cairo in June noted “constructive progress on inflation containment and a marked improvement in foreign reserves.”
