Egypt will phase out fuel subsidies by December, aligning prices with cost recovery levels as part of its economic reform program, the International Monetary Fund (IMF) confirmed Wednesday.
Ivanna Hollar, the IMF mission chief for Egypt, reaffirmed the government’s pledge to end fuel subsidies, first announced in mid-2024.
“The authorities have committed to bring the price of fuel products to cost recovery by end-December 2025. That commitment remains unchanged,” Hollar stated.
The IMF’s approval of a $1.2 billion disbursement on Monday follows the fourth review of Egypt’s $8 billion economic reform initiative.
This came after the IMF waived a primary budget surplus target for the country.
Egypt’s current account deficit surged to 5.4% in the 2023/24 fiscal year, driven by economic strains, including disruptions in the Suez Canal and challenges in the energy sector.
“We expect the current account deficit to remain elevated this year but to decline to about 3.5% of GDP in the 2025/26 fiscal year,” Hollar said.
Suez Canal revenues, a crucial source of foreign currency, plummeted to $931 million in the third quarter of 2024 from $2.4 billion a year earlier.
The sharp decline resulted from rerouted shipping amid the Gaza conflict.
Despite three fuel price hikes in 2024, Egypt continues to spend approximately 10 billion Egyptian pounds ($197 million) monthly on fuel subsidies, according to Petroleum Minister Karim Badawi.
Prime Minister Mostafa Madbouly reiterated the government’s commitment to financial reforms, stating that while diesel will remain partially subsidized, broader petroleum subsidies will no longer strain the national budget by year-end.