IMF Puts Egypt Inflation at 16.7 Percent for the Second Half of 2026 and Delays Target Convergence by a Year
The International Monetary Fund published the full staff report behind Egypt’s seventh programme review on 13 August 2026, a 148 page document issued as Country Report No. 2026/224 and dated 17 July. The Executive Board had completed the review on 30 July, releasing about 1.8 billion dollars. The report is the detail behind that decision, and it carries material the announcement did not.
The first item is the inflation path. The Fund expects Egyptian inflation to rise to 16.7 percent in the second half of 2026, driven by higher energy prices, exchange rate depreciation and unfavourable base effects, and it now sees convergence to the Central Bank of Egypt’s target range delayed by about one year.
The money and the arithmetic
Completion of the two reviews allowed Egypt to draw SDR 1.11 billion, about 1.5 billion dollars, under the Extended Fund Facility, and SDR 200 million, about 272 million dollars, under the Resilience and Sustainability Facility. That brings total purchases and disbursements under the two arrangements to about SDR 5.4 billion, or about 7.3 billion dollars.
| Egypt, IMF seventh review | Figure |
|---|---|
| Drawn on completion, EFF | SDR 1.11 bn, about US$1.5 bn |
| Drawn on completion, RSF | SDR 200 mn, about US$272 mn |
| Total drawn under both arrangements to date | SDR 5.4 bn, about US$7.3 bn |
| Real GDP growth, Q3 FY2025/26 | 5.0 percent |
| Real GDP growth, first nine months FY2025/26 | 5.2 percent |
| Projected growth, FY2025/26 | about 4.6 percent |
| Projected growth, FY2026/27 | 4.4 percent |
International Monetary Fund, Press Release 26/271, 30 July 2026, and Country Report No. 2026/224, published 13 August 2026.
The FY2025/26 projection of about 4.6 percent is only 0.1 percentage points below what the Fund carried at the fifth and sixth reviews. Against that, the FY2026/27 projection of 4.4 percent is a step down, and the Fund attributes it to the lagged effects of the regional conflict through weaker investment, higher input costs and persistent uncertainty.
Prices, and the consultation the overshoot triggered
Headline inflation declined steadily until March 2026, when it rose to 15.2 percent, about 1.4 percentage points above staff expectations, which the Fund attributes to exchange rate depreciation and higher energy prices. It eased to 14.3 percent in June while core inflation rose to 14.3 percent, with Fund estimates putting seasonally adjusted month on month core inflation at an elevated 1.5 percent.
That overshoot has a mechanical consequence inside the programme. Annual urban inflation exceeded the programme’s upper outer band at both end March and end June 2026, and the staff report records that this triggered a Monetary Policy Consultation Clause consultation with the Executive Board. Four of the seven end March indicative targets were met: the floor on social spending, the central bank’s foreign exchange intervention rule and budget, the ceiling for public investment, and the ceiling on the net change in government guarantees.
On the binding criteria, the report states that the quantitative performance criterion on central bank lending to public agencies was missed, and that repayments were made in early June to correct for the March deviation and ensure the end June criterion is met. On available information, the Fund expects all end June 2026 quantitative performance criteria to be met.
The external and fiscal accounts
The current account came under pressure in March on higher oil and gas prices. Record remittance inflows, robust tourism receipts and a gradual recovery in Suez Canal revenues contained the impact, and the Fund estimates the current account deficit at 4.5 percent of GDP for FY2025/26. Oil hedging contracts and long term gas supply agreements cushioned the energy cost. Gross international reserves reached 119 percent of the Fund’s reserve adequacy metric by end June, including through recent central bank purchases amid renewed inflows.
Fiscal performance is the stronger side of the file. By end March 2026 both the primary balance and tax revenue targets had been exceeded. Gross financing needs fell by 5 percent of GDP in FY2025/26. The tax to GDP ratio is projected to rise by 1.2 percentage points in FY2026/27, and the primary surplus to rise from 4.8 percent of GDP in FY2025/26 to 5 percent in FY2026/27.
Structural reform is the weaker side. The Fund calls progress uneven, welcomes the recently adopted State Ownership Policy, and says the divestment programme has moved more slowly than anticipated. Divestment proceeds stand at around 520 million dollars following the Gabal El Zeit transaction and Ministry of Finance sales of shares in selected listed companies.
What the Board said
Following the Board discussion, Mr Nigel Clarke, Deputy Managing Director and Acting Chair, said that “an appropriately tight monetary stance, supported by clear communication, is important to anchor expectations, return inflation to target, and reinforce the credibility of the inflation targeting framework.” He described continued fiscal discipline and decisive implementation of the State Ownership Policy and divestment agenda as essential, and identified elevated public debt, large gross financing needs and a sizable state footprint as the vulnerabilities that remain.
Why it matters
A programme review cleared on schedule and a staff report documenting an inflation overshoot large enough to trigger a Board consultation are two different pieces of information, and only the first made the wires on 30 July. The second became public on 13 August. For anyone pricing Egyptian risk, the material fact is that the Fund now expects inflation to rise to 16.7 percent in the second half of this year and has pushed back convergence to target by about a year, while still projecting growth of 4.4 percent for FY2026/27.
For the Gulf the transmission is direct and mostly through the labour and remittance channel. The Fund records record remittance inflows as one of the three things that held Egypt’s current account together in a quarter when energy prices moved against it. Those inflows originate overwhelmingly in this region. Gulf capital is also on the other side of the divestment agenda the Fund is pressing Cairo to accelerate.
Outlook
The Central Bank of Egypt’s Monetary Policy Committee meets on 20 August, its next scheduled decision after the 9 July meeting. The Fund’s published view is on the record ahead of it. Beyond that, the markers are the end June programme data, which the Fund expects to show all quantitative performance criteria met, the pace of divestment against the roughly 520 million dollars booked so far, and whether the projected rise in the tax to GDP ratio of 1.2 percentage points materialises in FY2026/27.
Sources: International Monetary Fund, Press Release 26/271, 30 July 2026. International Monetary Fund, Country Report No. 2026/224, Arab Republic of Egypt, Seventh Review Under the Extended Arrangement Under the Extended Fund Facility and Second Review Under the Resilience and Sustainability Facility Arrangement, published 13 August 2026. Central Bank of Egypt, Monetary Policy Committee calendar.
