Rising inflation, foreign exchange shortages, and high debt levels are challenges Egypt has been facing, coupled with difficulties arising from geopolitical tensions spurred by the Gaza conflict on the Rafah borders.

Red Sea attacks have also led to a decline in tourism and Suez Canal revenues, two main sources of foreign currency the country needs.

An International Monetary Fund (IMF) chief has forecasted that Egypt’s next fiscal year will average nearly 25.5% and 15.25% by the end of the next fiscal year. Ivanna Vladkova Hollar, IMF’s Advisor to the Middle East and Central Asia Department and Mission Chief for Egypt, said that the country’s inflation is projected to remain high in the near-term.

At the same time, the appreciation trend that the official currency has recently experienced may reduce some of the price pressures that the IMF had forecast. 

Last week, the IMF approved an expanded $8 billion financial support program for Egypt, allowing for the immediate disbursement of $820 million. 

Egypt’s growth will slow to 3% in 2024 from 3.8% in the 2022-2023 fiscal year but will recover to about 4.50% during the 2024-2025 fiscal year.

“As we expect the environment facing the private sector, including the availability of critical foreign exchange, to improve, we have upgraded the growth forecast to just under 4.50% for next year,” said Hollar.

Meanwhile, on the $35 billion investment deal made in February by Abu Dhabi Developments Holding Company (ADQ,) Hollar added that Egyptian authorities have formed a commitment to save a significant portion of the proceeds in gross international reserves, which will help strengthen the buffers to deal with forward-looking shocks. The country will also use 50% of the local currency value of those proceeds to reduce public debt.

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