Published: June 15, 2026
Egypt has not been physically impacted by the conflict in Iran. But two years after implementing wide-reaching reforms, Egypt’s economic resilience is on the line.
Egypt is often viewed as a point of stability in the Middle East. In a region characterised by turbulence, it has garnered a reputation as a peacemaker and mediator. It has also shown a level of economic resilience amid the shocks of recent years, especially compared to other countries in the region. But as the US-Israel war in Iran continues, the most populous country in the Arab world is finding that resilience tested.
At the start of March, Egyptian President Abdel Fattah El-Sisi said the national economy was in a “state of near-emergency”. With the Strait of Hormuz blockaded, and other Gulf energy facilities under strike, Egypt was contending with a major disruption to its energy supplies. Meanwhile, foreign investors reportedly pulled billions of dollars from local debt markets, causing the Egyptian pound to plummet in value.
As of mid-June, the Egyptian pound sits at about 52 EGP to the US dollar, down from around 47 EGP to the dollar in mid-February. This places the pound among the worst performing currencies since the war began since there were periods when it lost more than 15% of its value. This is a substantial setback for a country that has taken major steps in recent years to stabilise its economy.
While Cairo has stated it is among the “best-performing” countries in managing the crisis, its situation as a net energy importer makes it vulnerable to supply disruptions. With oil prices surging, the country’s energy import bill has more than doubled since the start of the conflict. According to S&P Global, Brent crude oil was priced at US$141 per barrel in early April, its highest level since the 2008 financial crisis, and now it has settled just under the US$100 mark.
Unsurprisingly, Egypt’s citizens are feeling the pinch. The government has responded with a package of energy-saving measures, including early closures for non-essential businesses, mandatory remote working measures on Sundays, and streetlights dimmed by 50%. Despite efforts to protect poorer households from price hikes, petrol and diesel prices have risen by about 14-17%, and consumer energy bills are climbing.
Not yet in crisis
It would be mistaken to describe the country as being in crisis. In its latest Economic Outlook, published early April, Allianz Research forecast that growth in Egypt will slow slightly to 4.0% this year, before rebounding to 5.0% in 2027. That’s down from the heights of 5.3% it experienced last summer, but it’s certainly healthier than the -1.0% forecast for the wider region this year.
Over the past two years, the country has been working to implement economic and structural reforms. The need for change was clear: as of 2023, public debt stood at 96% of GDP following a blitz of public spending on megaprojects. Meanwhile the government was artificially propping up the local currency through draining its foreign reserves. This kept the pound high, but curbed the country’s ability to import goods – not ideal for a nation so dependent on Russian grain and Chinese machinery.
In March 2024, Egypt pulled the plug: it let the pound float and hiked interest rates, whereupon the pound dropped by 40%. In return, the government secured an $8bn funding agreement with the International Monetary Fund (IMF), as part of a broader wave of foreign investment that also included $35bn from the UAE.
The relevant metrics since then have been encouraging. Inflation has been contained, private investment has surged, and public debt has fallen, albeit slightly. In October 2025, S&P Global raised Egypt’s long-term credit rating from B- to B, noting that ‘while the government’s debt-servicing burden remains very high… we expect fiscal consolidation to continue’.
An IMF press briefing on 4 June, more or less reaffirmed a status quo noting the challenges and actions taken to manage the impacts of the US-Israeli Iran war. Julie Kozack, director of communications department, confirmed that the IMF’s staff visited Cairo in May for the seventh review of Egypt’s Extended Fund Facility and the second review under the Egypt’s Resilience and Sustainability fund. The staffers focused on the several items including “the authorities' response to the war in the Middle East, including the policy package that they put in place, and as well as on progress with structural reforms. So, it focused on their response to the war as well as the kind of program-related issues on policies and reforms.”
Kozack noted that “the authorities did put in place a package to sustain macroeconomic stability, preserve buffers, and reduce vulnerabilities by maintaining a flexible exchange rate regime, ensuring an appropriate tight monetary policy to bring down inflation, and to continue fiscal consolidation to strengthen debt sustainability and reduce financing needs”. She also highlighted that the IMF’s program with Egypt “focuses on enhancing the social safety net to protect the most vulnerable”. All in all, the IMF appears to be satisfied with the actions underway by the Egyptian government to manage the economy with the challenges that the war brings to bear.
There remains a focus on reducing the “state's footprint and strengthening governance and transparency and ensuring a level playing field” as well. The IMF sees lower state involvement in the economy as a key structural reform in the current agenda. There IMF is expecting “an updated state ownership policy” from the Egyptian authorities that will among other things “promote more private sector participation in the Egyptian economy”.
A canary in the coal mine