The International Monetary Fund is carrying out a pivotal review in Egypt, as the government asks households to absorb another round of economic pain through higher electricity tariffs and fuel prices, shrinking subsidies and a growing reliance on debt to contain the fallout from the Iran war.
For many Egyptians, the regional shock is not being felt first through financial markets or foreign reserves, but through rising utility bills, uncertainty over bread subsidies and mounting pressure on already strained household budgets.
At the same time, IMF staff are in Cairo for the seventh review of Egypt’s Extended Fund Facility and the second review of its Resilience and Sustainability Facility, a process that could unlock another $1.6 billion if a staff-level agreement is reached and later approved by the Fund’s board.
Julie Kozack, the IMF's communications director said in Washington on Thursday that the impact of the war in Iran on Egypt’s economy had so far remained “relatively contained” thanks to policy measures that eased fiscal and external pressures, and that growth was expected to remain resilient.
But what officials describe as “containment” at the macroeconomic level increasingly means shifting the burden of adjustment downwards on to consumers, who are already facing higher prices. Residents of legally ambiguous neighbourhoods and households dependent on state support are among those hit hardest.
Ms Kozack said IMF's managing director Kristalina Georgieva had a “constructive meeting” with Egypt's President Abdel Fattah El Sisi in Cairo, where they discussed the global implications of the war and how the fund can best support reform efforts.
Despite the fund’s optimism, concerns over the conflict’s impact on the country’s battered economy and the well-being of its poorest have intensified recently.
S&P said in late April that Egypt, along with Mozambique and Rwanda, is among the economies most exposed to the current energy shock.
Although Egypt’s deep domestic capital markets offer some cushion, and the state can still borrow heavily at home and abroad, this does not mean the shock disappears but that the costs can be redistributed downwards.
Energy price hikes deepen the squeeze
Egypt raised power tariffs by up to 31 per cent from April for higher and medium-use households and all commercial customers, the Consumer Protection Agency said earlier this week . This followed earlier increases in fuel and power price in March.
Authorities cited the global energy crisis and the budget burdens of the war.
A second, less-publicised decision has been even more politically revealing. Millions of people on so-called code meters, prepaid electricity meters used to provide power to unlicensed buildings and informal areas, have effectively lost access to subsidies afforded to them until last month.
Code meters were originally introduced as a stopgap. They allowed the state to connect power to homes in buildings that lacked full legal status without recognising formal ownership of the residents.
The meter is attached to a code rather than a named owner, making it a temporary administrative workaround rather than a standard utility contract.
It allowed the government to stop residents stealing power from the grid, a common practice, while they worked on collecting regularisation fees from citizens who carried out unlicensed construction.
From April, however, all code-meter consumption began to be charged at a unified high rate rather than the partly subsidised stepped system used previously. Between six and seven million code meters are now in use, meaning millions of households are directly affected by the recent cut in state support to this kind of user.
Prime Minister Mostafa Madbouly has been unusually direct in revealing the thinking behind this.
Last week, he described the buildings powered by code meters as fundamentally illegal and argued that the original legal response should have been demolition. The state has the right to charge full power costs until properties are regularised, he added.
Complaints have multiplied from residents who say they have already completed reconciliation procedures or live in effectively formalised units but are still being billed as code-meter users.
In a statement earlier this week, the Electricity Ministry directed power distribution companies to handle the complaints.
Bread subsidies enter politically sensitive territory
The same debate is raging over food support. Supply Minister Sherif Farouk said on Wednesday that the government is studying a shift from in-kind bread and ration-card subsidies to a form of conditional cash support from the next fiscal year, by July, using the existing subsidy-card system.
This means the state will sell bread at market prices across the board and instead give the country’s poorest more money on their ration cards to buy it themselves.
He insisted that the state would not “lift its hand” from support and presented the move as a way to prevent subsidies leaking to the non-poor while giving families more freedom to choose what they buy.
Many MPs have since raised questions about replacing bread support with cash, warning that any move affecting such a politically and socially sensitive staple would need wider public and parliamentary debate and clear guarantees that low-income households would not be excluded.
Bread subsidies have often been cast as a red line for Egyptians that politicians would do well not to cross. Yet in June 2024 the government raised the price of a subsidised loaf from 5 to 20 piastres, a four‑fold increase and the first in three decades, and the move passed with only muted pushback signalling that things might have changed.
What makes this especially delicate is that Egypt is not facing the Iran war shock from a position of fiscal ease.
Egypt’s external debt has climbed to roughly $164 billion by the end of 2025, up from about $153 billion in mid‑2024, even as the country faces external repayments of more than 50 billion dollars between early 2026 and next September.
Since the Iran war began, about $10 billion has exited Egypt’s debt markets, increasing pressure on reserves and financing.
The central bank has continued to roll over Egypt’s short‑term foreign‑currency debt through one‑year, dollar‑denominated T‑bills, holding several auctions this year in the $900 million to $1.5 billion range.
Egyptian banks are the main buyers of this paper, according to Finance Ministry data and central bank auction results.
That matters because it means a growing share of banking liquidity is being used to fund the state rather than broader productive lending.
In effect, the sovereign is crowding out other borrowers while keeping itself afloat through ever larger debt rollovers.
Parliamentary debate this month has reflected that unease.
During a budgetary session earlier this month, MPs warned that debt service is consuming enormous shares of spending and argued that the government had become too liberal with borrowing.
Those criticisms go to the heart of the current moment. Egypt’s answer to the Iran war shock is not just to seek more IMF money or reassure markets. It is also to push more of the adjustment on to households through higher utility costs, stricter subsidy rules and a more selective approach to who deserves state support.
The shock may indeed be “contained” at the macro level, but in Egypt containment increasingly means ordinary households paying more to keep the system stable.
