As Egypt gradually emerges from one of its most turbulent economic periods in recent history, the International Monetary Fund (IMF) is urging the country to seize its moment of stabilization by expanding its domestic tax base. The recommendation comes as part of the IMF’s sixth review of Egypt’s $8 billion financial assistance program, amid encouraging indicators of macroeconomic recovery.
“Egypt has made substantial progress toward macroeconomic stability,” said Vladkova Hollar, IMF Mission Chief for Egypt.
Following a mission to Cairo earlier this month, the IMF commended the Egyptian government’s fiscal reforms, monetary tightening, and structural realignments, forecasting a growth upgrade for the 2024/2025 fiscal year to 3.8%—a notable improvement driven by stronger-than-anticipated performance in the first half of the year.
A Stabilizing Economy, but Structural Reforms Needed
While the IMF acknowledged the significant strides Egypt has made—particularly in curbing inflation and realigning fiscal priorities—it emphasized that “domestic revenue mobilization will need to continue, mainly by widening the tax base and streamlining tax exemptions.”
Egypt’s inflation rate, which soared past 30% in 2023, dropped to 12.8% in February 2025—its lowest level since the 2022 economic downturn. This progress is largely attributed to improved foreign currency liquidity, tighter monetary policies, and enhanced fiscal oversight.
However, the IMF stresses that Egypt must modernize and simplify its tax and customs systems, not only to support fiscal sustainability but to anchor future growth against external shocks.
Debt Obligations and Currency Pressures
Egypt remains Africa’s most indebted nation to the IMF, having secured an initial $3 billion deal in 2022, which was augmented to $8 billion in March 2024. In exchange for financing, the country enacted a series of austerity and liberalization measures, including:
- A 35% currency devaluation in early 2024
- Sharp increases in fuel prices
- Cuts in public subsidies
These steps were necessary to unlock the full disbursement of the IMF package and restore investor confidence.
Infrastructure Oversight and Public Sector Reform
The IMF also praised Egypt’s enhanced supervision of large-scale infrastructure projects, particularly in the public sector, which has helped reduce demand-side inflationary pressures. Officials noted that greater accountability and efficiency in project execution are yielding early benefits.
What Lies Ahead
As Egypt continues to rebuild its economic foundation, the emphasis is now shifting toward structural tax reform. The IMF believes that broadening the tax base will help:
- Reduce the country’s reliance on volatile external borrowing
- Strengthen public finances
- Enable the government to invest in health, education, and social safety nets
The challenge, however, lies in balancing these reforms with the socio-political sensitivities of a population already grappling with the residual effects of inflation and austerity.
A Delicate Balancing Act
The Egyptian government, led by President Abdel Fattah el-Sisi and Finance Minister Mohamed Maait, has so far walked a delicate line between reform and relief. As the IMF’s latest assessment makes clear, the next phase of recovery will require difficult but necessary choices—chief among them being the overhaul of the tax regime.
