Egypt’s net foreign reserves surge to $47.109 billion in December 2024

Egypt's net foreign exchange reserves increased to $47.109 billion in December, up from $46.952 billion in November, according to the latest data from the Central Bank of Egypt. This indicates a continued growth in Egypt's foreign exchange reserves, providing support for economic stability.

According to data from the Central Bank of Egypt, Egypt's net international reserves reached $46.597 billion by the end of August 2024, up from $46.49 billion at the end of July. This upward trend began in June, when reserves grew to $46.3 billion from $46.126 billion in May, following reserves of $40.4 billion and $41 billion in March and April, respectively. This series of increases demonstrates a sustained recovery in Egypt's foreign exchange reserves.

The main reasons for the reserve growth are a surge in national investments and international financial aid programs. Of particular note is the $35 billion agreement with the UAE regarding Ras El Hekma in February, the largest foreign direct investment deal in Egypt's history. Following the signing of this agreement, Egypt's net international reserves increased by $11.2 billion in five months. Additionally, Egypt has received over $57 billion in financial assistance from international financial institutions and development partners.

Egypt received the third tranche of its $8 billion loan program from the International Monetary Fund (IMF) after successfully completing its third review in July. Furthermore, during the Egypt-EU Investment Conference, an agreement on a 1 billion euro deal was reached, part of the EU's commitment of 7.4 billion euros to Egypt. These financial inflows are supporting Egypt's economic recovery.

Economic forecasts for Egypt indicate a growth rate between 3.5% and 4.5% in 2025, driven by ongoing reforms aimed at boosting investment and curbing inflation. The Information and Decision Support Center (IDSC) recently reported that the IMF projects the Egyptian economy to grow by 4% in 2025, significantly higher than the 2.7% projected for 2024. The IMF also forecasts that Egypt's GDP at constant prices will rise to EGP 8.7 trillion in 2025, up from EGP 8.4 trillion in 2024, and GDP at current prices is expected to increase to EGP 17.5 trillion in 2025, compared to about EGP 13.8 trillion in 2024.

Multiple international institutions, including the IMF, predict positive growth for the Egyptian economy in 2025. The Egyptian government has implemented several reforms to stimulate investment, boost private consumption, and increase remittances. The continued development of Ras El Hekma, along with a potential easing of geopolitical tensions in the region, is expected to support Egypt's recovery in 2025. The IMF projects that, in the medium term, Egypt's economic growth will accelerate to around 5% between 2025 and 2029.

The World Bank also projects growth rates of 3.5% and 4.2% for 2025 and 2026, respectively. This optimistic outlook is attributed to increased investment and improved private consumption, with the bank forecasting a 4.8% growth in private consumption in 2025, up from 4.6% in 2024. Data from the Ministry of Planning shows that Egypt's GDP grew by 3.5% in the first quarter of fiscal year 2024/25, up from 2.7% in the previous year.

An IMF report highlights that Egypt's gross and net international reserves now exceed its obligations, and the gross international reserves are projected to increase to $66.5 billion in fiscal year 2028-2029, up from $47.2 billion in fiscal year 2024-2025. Similarly, Fitch Ratings expects international reserves to increase to $49.7 billion this year and to reach $53.3 billion by 2025-2026. Furthermore, Fitch revised Egypt’s long-term foreign currency issuer default rating from stable to positive, while also projecting the country’s current account deficit to decrease to 3% of GDP by 2025-2026, attributed to increased exchange rate stability. Inflation is expected to fall to 12.3% by June 2025.

The International Institute for Strategic Studies reports a significant rise in Egypt's debt-to-GDP ratio, from 69.6% in 2010 to 92.7% in 2023. The country faces a shortage of foreign currency, leading the government to cut social safety nets in an effort to manage its substantial debt. The disruption caused by Russia's invasion of Ukraine in 2022 has further complicated the economic situation and continues to impact the country. Egypt's reliance on wheat imports from Russia and Ukraine, as well as its dependence on tourism, remittances, Suez Canal revenue, foreign debt, and capital flows, makes the country's economy vulnerable, particularly amid heightened tensions in the Middle East.

A report by the United Nations Development Programme estimates that, under a medium-intensity scenario, Egypt's GDP may decline by 2.6% in fiscal year 2023-2024 and by 1.3% in fiscal year 2024-2025. The UNDP also predicts that, under similar scenarios, declines in tourism and Suez Canal revenues could reach approximately $9.9 billion over these two fiscal years. Nonetheless, investments from the UAE, ongoing reforms, and funds from the IMF and World Bank have propelled Egypt's economic recovery in 2024 and may continue to facilitate growth in 2025.

Several positive indicators suggest that Egypt's economic situation is improving, including a more than threefold increase in the primary budget surplus to $18 billion (about 6% of GDP) for the fiscal year ending June 2024. Inflation has also shown a monthly downward trend since the announcement of the Ras El Hekma deal, and foreign exchange reserves reached a record $46 billion in July 2024, an increase of nearly a third since February.