Egypt’s net foreign reserves increased to $47.109 billion in December, up from $46.952 billion in November, as revealed by recent data from the central bank.
At the close of August 2024, Egypt’s net international reserves reached $46.597 billion, rising from $46.49 billion at the end of July, according to the Central Bank of Egypt (CBE). This upward trend began in June, when the reserves grew from $46.126 billion in May to $46.3 billion, following increases from $41 billion in April and $40.4 billion in March.
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Funding and investments fuel growth
The growth in reserves is primarily attributed to a surge in investments throughout the nation, alongside international financial assistance packages. Notably, a significant $35 billion deal with the UAE regarding Ras El-Hekma, signed in February, marked the largest foreign direct investment (FDI) agreement in Egypt’s history. Following this agreement, Egypt’s net international reserves experienced an increase of $11.2 billion over a span of five months.
Additionally, Egypt has secured over $57 billion in financial packages from international financial institutions and development partners. In July, the country received its third tranche of the $8 billion loan program from the International Monetary Fund (IMF), following the successful completion of the third review. Furthermore, during the Egypt-EU investment conference, an agreement was reached for a €1 billion deal as part of the €7.4 billion pledged to Egypt by the European Union.
Economic growth expectations
Predictions for Egypt’s economy indicate a growth rate between 3.5 percent and 4.5 percent in 2025, driven by ongoing reforms aimed at boosting investments and curbing inflation. The Information and Decision Support Center (IDSC) recently reported that the IMF anticipates a growth rate of 4 percent for the Egyptian economy in 2025, a notable increase from the expected 2.7 percent in 2024. The IMF also forecasts that Egypt’s GDP at constant prices will rise to EGP8.7 trillion in 2025, up from EGP8.4 trillion in 2024, with the GDP at current prices projected to increase to EGP17.5 trillion in 2025, compared to about EGP13.8 trillion in 2024.
Positive economic recovery
Multiple international institutions, including the IMF, predict that Egypt’s economy will experience positive growth in 2025. The Egyptian government has enacted several reforms to stimulate investments, enhance private consumption, and increase remittances. The ongoing development of Ras El-Hikma and the potential easing of geopolitical tensions in the region are expected to support Egypt’s recovery in 2025.
In the medium term, the IMF forecasts that Egypt’s economic growth will accelerate to around 5 percent between 2025 and 2029. The World Bank also projects growth rates of 3.5 percent and 4.2 percent for 2025 and 2026, respectively. This optimistic outlook is attributed to increased investments and improvements in private consumption, which the bank predicts will grow by 4.8 percent in 2025, up from 4.6 percent in 2024. Data from the planning ministry indicates that Egypt’s GDP growth rate was 3.5 percent in the first quarter of the 2024/25 fiscal year, a rise from 2.7 percent the previous year.
Positive outlook for Egypt
An IMF report highlighted that Egypt’s gross and net international reserves now exceed its obligations, with a forecasted rise in gross international reserves to $66.5 billion by the fiscal year 2028-2029, up from $47.2 billion in fiscal year 2024-2025. Similarly, Fitch Ratings anticipates an increase in international reserves to $49.7 billion this year, with a projection of $53.3 billion by 2025-2026. In addition, Fitch upgraded Egypt’s long-term foreign currency issuer default rating from stable to positive, while expecting a reduction in the country’s current account deficit to 3 percent of GDP by 2025-2026, attributing this to enhanced exchange rate stability. Inflation is also projected to decrease to 12.3 percent by June 2025.
Challenges and future outlook
The debt-to-GDP ratio in Egypt has risen significantly, climbing from 69.6 percent in 2010 to 92.7 percent in 2023, as reported by the International Institute for Strategic Studies. The country has faced a foreign currency shortage, leading the government to reduce its social safety net in an effort to manage its substantial debt. The economic landscape was further complicated by the disruptions stemming from Russia’s invasion of Ukraine in 2022, which continues to impact the nation. Egypt’s reliance on wheat imports from both Russia and Ukraine, along with its dependence on tourism, remittances, Suez Canal revenues, foreign debt, and capital flows, has made the economy vulnerable, particularly amid rising tensions in the Middle East.
A UNDP report estimates that Egypt’s GDP could decline by 2.6 percent in the fiscal year 2023-2024 and by 1.3 percent in the fiscal year 2024-2025 under a medium-intensity scenario. The UNDP also projects that the drop in tourism and Suez Canal revenues during these two fiscal years could reach approximately $9.9 billion in a similar scenario. Nevertheless, investments from the UAE, ongoing reforms, and funding from the IMF and the World Bank have driven Egypt’s economic recovery in 2024 and are likely to continue promoting growth in 2025.
Several positive indicators suggest improvements in Egypt’s economic landscape, including a primary fiscal surplus that more than tripled to $18 billion (approximately 6 percent of GDP) for the fiscal year ending in June 2024. Inflation has also shown a downward trend each month since the announcement of the Ras El-Hikma deal, and foreign exchange reserves reached a record level of $46 billion in July 2024, representing nearly a one-third increase since February.
