Egypt is in talks with the International Monetary Fund to extend timelines for key reforms under its economic reform program, a senior government official told EnterpriseAM. The official expects Egypt to be placed on the IMF Executive Board’s agenda before the Christmas holidays for the amendments to be given the final greenlight.

Negotiations with the IMF are reportedly progressing well, with the source noting that the talks have reached “near-consensus.” However, the final decision rests with the countries that hold the largest voting shares in the Fund.

The government is talking with the IMF about postponing a fuel hike planned for the end of this month to early March and postponing a subsequent hike in June to September, followed by quarterly hikes. This would push the timeline for fully eliminating fuel subsidies to June 2026, rather than December 2025, the source said, noting that such a decision would likely help bring down inflation in the interim. Easing Egypt’s fuel price hike obligations in 2025 could help lower inflation to below 20% by the end of next year, particularly by stabilizing diesel prices.

While inflation is on the decline, things are very much still touch-and-go, as the Central Bank of Egypt’s Monetary Policy Committee noted during its November meeting that while normalizing inflation dynamics and improved inflation expectations indicate that inflation “will continue its declining course,” it cautioned that upside risks remain due to fiscal measures, geopolitical tensions, and global trade disruptions.

There’s just one major issue — our growing fuel subsidy bill, which has risen 232% y-o-y to EGP 28.5 bn in the first quarter of FY 2024-25 despite three rounds of fuel price hikes this calendar year. Egypt’s fuel subsidy bill is projected to exceed the EGP 154.5 bn budget allocation, potentially surpassing EGP 200 bn by year-end due to a strong USD and higher oil prices amid geopolitical tensions, according to the source. The Finance Ministry has also disbursed an additional EGP 53 bn to the Oil Ministry to pay foreign partners and secure imports for strategic stockpiling.

This is a key area of concern for the IMF, as although our source noted that the surge was an unavoidable effect of rising global oil prices, currency depreciation, and higher summer fuel demand, the Fund has previously made clear that eliminating fuel subsidies is a key criterion for evaluating our economic reform program.

In efforts in part to cut demand, the government is ramping up support for programs to shift vehicles to run on natural gas and electricity, as well as expanding residential gas connections. A document previously seen by EnterpriseAM shows plans to convert 455k vehicles over the next four years to run on natural gas, averaging 113k per year, and connect 1.2 mn homes to natural gas as a cheaper alternative to gas cylinders. Switching to natural gas could save citizens EGP 30k-49k annually, with added savings for the state budget, according to the document.

Protecting low-income consumers from the impact of price hikes is a key concern, with Prime Minister Mostafa Madbouly noting in October that support measures will “continue to exist even after reaching the equilibrium point.” The government is also discussing a potential social support package as part of the upcoming state budget, set to be submitted to parliament in March, according to the source. However, managing inflation, stabilising prices, and promoting investment remain the country’s top priorities, they added.

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