The recent approval by the Executive Board of the International Monetary Fund (IMF) of Egypt’s fifth and sixth programme reviews represents a decisive moment for the country’s economic trajectory. Beyond its immediate financial value, the decision serves as a renewed international endorsement of Egypt’s reform path and a critical safeguard against global market volatility.
First: Key financing figures
The approval unlocks approximately $2.3bn in immediate financing, divided between nearly $2bn under the Extended Fund Facility (EFF) and around $300m as the first tranche of the Resilience and Sustainability Facility (RSF). The extension of the programme until 15 December 2026 further strengthens policy visibility and continuity. Yet the true importance of this step lies less in the cash injection itself and more in the confidence it restores. In emerging markets, credibility can be as powerful as capital.
Second: Impact on the exchange rate and capital flows
The immediate disbursement enhances foreign currency liquidity and bolsters foreign exchange reserves, giving the Central Bank of Egypt (CBE) greater flexibility to meet demand and prevent temporary imbalances in the market. This reinforcement of reserves acts as a buffer against sudden outflows of short-term capital, commonly referred to as “hot money”. By strengthening the external position, the IMF approval reduces the likelihood of abrupt currency pressures and narrows the space for speculative volatility.
At the same time, Fund backing tends to attract more stable forms of capital, particularly foreign direct investment and longer-term debt inflows. These flows are structurally less sensitive to short-term shifts in global risk appetite, which in turn lowers the Egyptian pound’s vulnerability to external shocks. In this sense, the IMF’s endorsement functions as a shock absorber, balancing pressures that may arise from international financial turbulence.
Exchange Rate Outlook: Can EGP Regain Strength?
Regarding the exchange rate outlook, current indicators suggest the Egyptian pound may gradually regain part of the value lost during recent periods of stress. The $2.3bn liquidity injection is expected to help absorb temporary pressures resulting from short-term capital exits. Meanwhile, inflation has declined to 11.9% in January 2026, improving the pound’s real purchasing power and reinforcing monetary stability. Growing remittances from Egyptians abroad, averaging roughly $4.3bn per month, further strengthen foreign currency supply within the banking sector. Together, these factors support expectations of a measured appreciation in the range of 3% to 5%, provided foreign direct investment continues as planned and geopolitical risks remain contained. Stability, rather than sharp fluctuations, is likely to define the second quarter of 2026.
Third: Broader Policy Implications
The IMF’s decision also carries important structural implications. It reflects recognition of the progress achieved in reducing inflation and maintaining exchange rate flexibility, both of which have been central pillars of the reform programme. It underscores the continued need to reduce the state’s footprint in the economy through asset divestment and to enhance oversight of off-budget entities in order to safeguard fiscal sustainability. At the same time, it highlights the importance of directing fiscal savings towards strengthening social protection programmes, including Takaful and Karama, to shield vulnerable groups during the reform process.
Ultimately, this approval represents the green light long awaited by markets. It signals that Egypt’s economy has built sufficient resilience to navigate global uncertainty while maintaining reform momentum. More importantly, it establishes a clearer roadmap through to the end of 2026, marking a gradual transition from a phase focused primarily on stabilisation to one increasingly centred on productive, private sector-led growth. In a volatile global environment, such institutional backing not only provides funding but anchors expectations, and anchoring expectations is often the decisive factor in sustaining economic stability.
Mohamed Abdel Aal – Banking expert
