Egypt in 2025: Navigating Economic Reforms and Regional Challenges

Economic Transformation and International Support

After securing an $8bn IMF loan and a $35bn development deal, Egypt is working to bounce back in 2025, though the nation continues to face both familiar and new challenges.

The country has experienced significant challenges, particularly with Suez Canal revenues dropping by more than 70% due to Houthi attacks on Western vessels in the Red Sea, forcing the government to seek additional borrowing.

Financial Reforms and Economic Outlook

The IMF projects growth of 4.1% for fiscal year 2025-2026, with encouraging signs emerging as the private non-oil sector shows tentative expansion after a prolonged period of contraction.

To foster resilience and promote dynamic, inclusive growth, Egypt must transition to a new economic model. This includes reducing state involvement, creating a level playing field, and allowing energy prices to reach cost recovery levels to enable private sector growth.

Social Challenges and Development Initiatives

The government’s planned shift toward cash subsidies in 2025 has raised concerns, particularly given current poverty rates of 40-45% in Egypt.

The country is implementing significant development projects, including the Greater Cairo Air Pollution Management and Climate Change Project, which supports investments to reduce air pollution and climate change emissions. The initiative includes developing an integrated climate and air quality management plan, with focus on waste management and public transport.

Regional Role and International Relations

Egypt maintains a crucial geopolitical position, playing a key role in regional diplomacy, particularly regarding the Israeli-Palestinian conflict and Nile Basin issues. The Grand Ethiopian Renaissance Dam dispute with Ethiopia and Sudan remains a significant regional concern.

The country also faces ongoing refugee challenges, with large numbers of Syrians and Sudanese arriving in recent years, bringing new economic challenges and political complications.

Looking Ahead

While 2025 presents both opportunities and challenges for Egypt, there are positive indicators. The IMF and World Bank project that Cairo could succeed in reducing inflation to a more manageable 21% this year, according to the IMF’s World Economic Outlook report.