MENA Oil Importers Confront a Reform Reckoning

The IMF’s October 2025 regional outlook defines a decisive split between MENA oil exporters and importers. Aggregate growth is forecast near 3.3 percent for 2025, supported by large sovereign investment in the Gulf, while non-oil economies—Egypt, Morocco, Tunisia, and Jordan—face slowing momentum as financing costs and real-income erosion tighten domestic demand. For investors, the signal is that policy execution and market credibility now determine access to capital, not geography. Egypt sits at the centre of this adjustment: its recovery is real but still expensive to finance.

Egypt’s real GDP growth is projected around 4.3 percent in 2025 on a calendar-year basis, versus 3.8 percent in 2024. Headline CPI fell to 11.7 percent y/y in September 2025 from 38 percent two years earlier, showing credible disinflation as global food prices stabilised and exchange-rate volatility eased. The pound (EGP=X ≈ 47.5–50.0 per USD through October) has settled into a managed-float band, reducing imported inflation. The Central Bank of Egypt cut its overnight deposit rate by 100 bps to 21.0 percent on 2 October after cumulative hikes exceeding 1,500 bps since 2022. Yet with the U.S. 10-year yield (^TNX ≈ 4.0 percent) anchoring global funding costs, Egypt’s 10-year local bond still yields 20–22 percent, keeping real rates positive and debt-service burdens high. The yield gap of roughly 1,600–1,800 basis points over U.S. Treasuries confirms that the sovereign premium remains substantial even as inflation recedes.

External indicators show stronger buffers but persistent fragility. Net international reserves reached USD 49.5 billion in September 2025—equivalent to about 6–7 months of goods imports—helped by remittance inflows of USD 36.5 billion in FY 2024/25 (+66 percent y/y) and a 21 percent rise in tourist arrivals. Total external debt stood at USD 156.7 billion in Q1 2025, or roughly 45 percent of GDP (USD 350 billion). Fiscal pressures persist, with interest payments absorbing nearly 55 percent of revenues, but the front-loaded energy-subsidy realignment in April and October (average retail fuel price +10–15 percent) will narrow quasi-fiscal deficits from 7.4 to about 6 percent of GDP in FY 2025/26. Brent crude (BZ=F) trading in the USD 75–80 range and WTI (CL=F) near USD 71 have lowered Egypt’s diesel import bill by roughly USD 250 million per quarter compared with 2023 averages, reinforcing the disinflation trend.

The monetary-fiscal mix is stabilising the macro frame but constraining credit. With policy rates high and state borrowing heavy, private-sector lending growth has slowed below 12 percent y/y, and manufacturing PMIs remain near the 50 threshold, indicating output stagnation. Bank profits benefit from carry trades in high-yield government paper, but crowding-out limits investment transmission. The equity market has re-rated the policy progress: the EGX30 (^CASE30) is up about 27 percent year-to-date through mid-October, led by banks and export-linked firms, while external spreads on USD 2032 bonds hover around 850 bps, little changed despite equity gains. Investors differentiate between nominal stability and structural reform delivery—the latter remains the decisive catalyst for spread compression.

Global linkages frame the outlook. Compared with peers such as Kenya, Ghana, and Pakistan—each with double-digit inflation and external debt near 50–60 percent of GDP—Egypt’s adjustment appears ahead in price stability but behind in private-credit depth. The MENA divergence also mirrors Latin America’s earlier pattern: commodity exporters convert fiscal surpluses into reserve strength while importers manage via financial repression. As U.S. real yields persist above 2 percent and dollar liquidity remains tight, capital will continue to reward policy transparency and consistent market signals.

Forward verification rests on measurable thresholds. Sustained single-digit CPI into Q4 2026 without renewed administrative controls would confirm policy-anchored disinflation. A decline in the 10-year local yield toward 15–16 percent by mid-2026 would validate falling term premia and deeper investor participation. Reserves maintained above USD 50 billion through 2026 would demonstrate self-financing resilience rather than episodic inflows.

Meeting these markers would reposition Egypt and its peers as investable reform economies within 12–18 months; failure would entrench high-beta status in global portfolios and preserve the region’s two-speed structure between oil wealth and imported vulnerability.