Foreign Investors Continue Buying Egyptian Debt despite Delay of IMF Review
Despite the International Monetary Fund's decision to postpone the fifth review of Egypt's $8 billion loan program, foreign investors appear largely unfazed, continuing to pour capital into Egyptian government debt.
The cost of insuring Egypt's sovereign bonds has stabilized at 4.86% for five-year contracts—its lowest level since January 2022—signaling sustained confidence in the country's short-term fiscal outlook.
The IMF confirmed last week that the fifth tranche of funding, originally scheduled for mid-2025, will be delayed until the fall. The decision was attributed to slow progress on structural reforms, particularly regarding state divestment programs and Egypt's limited advancement in reducing the public sector's footprint in the economy. The IMF also announced it would combine the fifth and sixth reviews to give Egyptian authorities more time to deliver on key reform milestones.
Still, the delay did not trigger a sell-off. On the contrary, foreign and regional investors purchased nearly $1.2 billion in government debt last week, according to data from the Egyptian Exchange.
'The review's postponement isn't a cancellation,' said Hany Genena, Head of Research at Al Ahly Pharos, in a televised interview. 'Egypt has made progress on other reforms like VAT adjustments, which should help reassure markets.'
Caution at the Central Bank, Confidence in the Bond Market
According to Ali Metwally, economic consultant at Ibis Consulting, the Central Bank of Egypt is likely to proceed with caution in light of the delay. 'The central bank will prioritize maintaining the stability of the pound and ensuring the attractiveness of treasury instruments to foreign investors,' he said.
Egypt's financial authorities are also juggling critical repayment obligations. In the fall, Egypt is scheduled to repay $976 million to the IMF, further heightening the need for liquidity and sustained investor appetite.
Despite these pressures, policymakers still anticipate a gradual easing in interest rates later this year. Metwally projects a rate cut of 200 to 400 basis points in the second half of 2025—assuming stable inflows. However, he warned that any large-scale outflow of short-term capital, or 'hot money,' could push the dollar above 52 Egyptian pounds, potentially forcing a delay in monetary easing.
Structural Reform: The Sticking Point
At the core of the IMF's concerns is Egypt's pace of structural reform. The country missed its target of $3.6 billion in asset sales and state exits by June 2025, a key condition of the fifth review, according to Alia Moubayed, Senior Economist at Jefferies International.
In an interview with Al Arabiya Business, Moubayed emphasized that the IMF's primary focus is not only on macroeconomic stabilization but on long-term sustainability, including reducing the public sector's role in driving economic growth.
Echoing this sentiment, IMF spokesperson Julie Kozack stated during a press briefing that while Egypt is making progress, further reforms are needed. 'We continue to work closely with Egyptian authorities to finalize key policy measures,' she said. 'This includes deepening structural reforms and reducing state ownership in key sectors.'
Geopolitics and Reform Fatigue
Some analysts suggest that political and regional dynamics may also be at play. Economist Medhat Nafie believes the IMF's timing cannot be isolated from Egypt's role in Middle East geopolitics, especially in the context of the ongoing regional crises. He also argues that the IMF has historically shown flexibility with Egypt, making an outright suspension of support unlikely.
Meanwhile, Egyptian businessman Hani Tawfik described the IMF's dissatisfaction as a potential 'blessing in disguise,' saying in a Facebook post that external pressure may force the state to recognize the urgency of structural reforms and the need to reduce its economic footprint.
Looking Ahead
As the IMF prepares for a combined review in the fall, Egypt faces a tightrope walk between maintaining foreign investor confidence, stabilizing its currency, and meeting long-standing reform commitments. For now, however, the bond market seems to signal trust in the country's near-term fiscal stability—despite the pause from the IMF.
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