Gov’t pushes to close out its IMF program before December, with a final review due in late November

The government is heading into the eighth and final review of our USD 8 bn IMF program with divestments and tax collection working in its favor, while energy subsidies and a stalled tax on freezones are still holding it back, three government officials tell EnterpriseAM. The Fund’s mission is expected in the second half of November, and both sides want to wrap things up before the program expires in mid-December, with Egyptian officials and IMF staff moving closer on the outstanding issues on the sidelines of the Fund’s annual meetings in Bangkok, the officials say.

Clearing the review would unlock the last of the program’s money: about USD 1.5 bn under the Extended Fund Facility and around USD 800 mn under the climate-focused Resilience and Sustainability Facility, IMF mission chief Amine Mati told us in August. It would also send us off with the Fund’s stamp of confidence, which will likely shape how investors read the years after the program.

What’s helping

The state’s exit program is likely to carry the most weight in the review, the officials say, with the government moving on offerings in Banque du Caire (BdC) and Misr Life Ins. before the program ends. The IMF wants about USD 1.5 bn in divestment proceeds by the end of the program, with all of it allocated to debt reduction, according to the Fund. The government had secured around USD 526.3 mn by July, according to the Fund’s latest staff report (pdf), with some USD 420 mn of that from the sale of the Gabal El Zeit wind farm and the rest (c. USD 106 mn) from Finance Ministry sales of stakes in some listed companies.

That leaves close to USD 1 bn to go, and one of the officials says the government is committed to meeting the target before the review is settled. BdC’s IPO could cover most of it: Banque Misr could sell up to 45% of the bank, a government official told us this week, up from the 30% in its intention to float notice. The 30% figure remains the working one, though, and the call on going bigger rests with Banque Misr and the Central Bank of Egypt. At 45%, the stake would be worth roughly EGP 36 bn (c. USD 690 mn) at the September fair value (against about EGP 24 bn for 30%), by our math. Misr Life was meant to be next; the government was targeting proceeds from the sale of a 20% stake by end-August. That sale is still to come, with expected proceeds of around EGP 14 bn (c. USD 261 mn). Together, the two could bring in close to the USD 1 bn still needed, by our math.

Those offerings are part of a broader plan, one official says. The plan leans on IPOs to deepen the stock market and sends part of the proceeds toward cutting public debt. It also ties into the updated State Ownership Policy for 2026-2030, which the IMF calls “a significant upgrade” because it goes beyond listing the sectors the state will leave and sets up a full framework for managing its portfolio, with tighter rules on governance and competing on equal terms with the private sector.

Tax collection should also help the government’s case, the officials say. The Finance Ministry is targeting a record EGP 3.5 tn in tax revenues this fiscal year, up about 30% y-o-y from EGP 2.7 tn last FY. The program’s other tax priorities include trimming VAT exemptions and improving compliance through digitization and better risk management.

What still needs work

One tax measure is still stuck, however: The IMF wants a 4% withholding tax on freezone companies’ sales into the local market. It’s a structural benchmark (one of the reform milestones the program is graded on) that parliament didn’t pass last year, and its publication in the official gazette is now due by end-November, according to the staff report. The government told the Fund it would bring the legislative change in November, but an official at the Tax Authority tells us the debate is still going over fears the tax would hurt investment and push up prices, and that no amendment is expected for now. Freezone factories supply the local market more cheaply than imports, even after paying customs, with no sea freight or delivery delays, and they lift exports at the same time, the official says. That leaves a benchmark at risk of slipping weeks before the review, though the tax itself would only bring in about 0.1% of GDP.

Then there’s energy, which one of the officials counts among the biggest challenges for public finances going into the review. Oil prices are running well above what the budget assumed, and the Egyptian General Petroleum Corporation (EGPC), which the IMF calls “the main source of fiscal risk,” still needs heavy financing. Even so, the government held fuel prices steady through end-December at the first quarterly review since the automatic pricing committee’s return, choosing to focus on raising output and curbing consumption instead, the official says.

Raising prices carries its own risks, the official explains. Any increase in energy prices would feed into transport and production costs and push inflation up, while putting reform off could make it harder to hit the fiscal targets agreed with the Fund. And if inflation picks up too fast, another official warns, the central bank may have to raise rates again, which would add to the cost of borrowing and servicing our debt. Weighing the economic and social impact will decide how subsidies get restructured to ease the pressure on the budget down the line, one of the officials says.

The same goes for electricity: Household power tariffs, which rose by an average of 12% at the start of August, will likely stay put until the end of the fiscal year in June, the officials say, as the state banks on savings from renewables. The Electricity Ministry saved EGP 40 bn last fiscal year by adding 2 GW of renewable capacity, according to the officials.

After the program

The review will look past this year’s numbers too. It will cover keeping stable inflows coming into the economy and the IMF’s read on the government’s plan for after the program, the officials say. “Sustaining growth, cutting public debt steadily with divestment proceeds and creating stable fiscal space to support health, education and social protection are among the most important indicators as the program wraps up,” one official tells us. The switch to cash subsidies, set to start in January, will be one of the main files on the table, according to another.

As for what comes after December, the government doesn’t look keen on another IMF program at this stage, one of the officials tells us. Egypt keeps up its loan repayments, so it could ask for one down the line, the official says, but that isn’t on the table. Instead, the government plans to lean on the Fund’s technical assistance to carry out its own post-program plan.

WHAT’S NEXT- The IMF mission is expected in the second half of November, and the freezone tax is due in the official gazette by end-November under the program, which expires on 15 December.