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Overview

Leveraging large-scale investments and financing, Egypt undertook monetary and exchange rate adjustments to address the foreign currency crisis that has been prevailing since 2022. The Central Bank of Egypt (CBE) allowed the Egyptian pound to depreciate vis-à-vis the dollar to address distortions in the foreign exchange market. In tandem, the CBE also increased key policy rates to control inflation and support the local currency. The government introduced mitigation measures, such as increased cash transfers and a higher minimum wage. The measures are supported by significant investments from the UAE and the completion of IMF reviews (originally slated for March and September 2023).

The recent adjustments seek to redress long-standing fiscal and external imbalances, worsened by multiple global shocks. The economy has been shifting towards non-tradable and low value-added sectors over the years, leading to underperformance in exports and FDI. High government debt (last reported at 95.2 percent of GDP at end-FY23), and thus elevated interest payments, have constrained spending on human capital and social protection. Inflation has been historically high, and has soared further to 33.8 percent in 2023 from 13.8 percent in 2022, and labor market participation has been declining, particularly for women. The severe global shocks, in particular the Russian invasion of Ukraine, global monetary tightening, and more recently the Middle East conflict have aggravated these pre-existing imbalances.

Despite these challenges, Egypt's medium-term macroeconomic outlook is expected to improve as the country pushes ahead with stabilization and structural reforms. Economic activity is forecast to drop to 2.8 percent in FY24 (from 3.8 percent a year earlier) but is projected to start recovering in FY25-FY26, supported by investments and a rebound in private consumption as inflation decreases. Government debt is expected to rise in the short term but decrease over the medium term with fiscal consolidation. Pursuing the ambitious reforms under the State Ownership Policy as well as ameliorating the business environment are essential for fiscal space, human capital development and social protection, and private sector growth and job-creation.

Last Updated: Apr 17, 2024

is the youth unemployment rate in North Africa and 21% in the Middle East, higher than any other region in the world

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Egypt: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments
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Maissa Abdalla
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