Egypt’s Private Sector Gambit: Can Market Reforms Satisfy the IMF Without Abandoning State Control?

Egypt finds itself walking a tightrope between preserving its state-dominated economic model and embracing the private sector reforms demanded by international lenders.

A Familiar Dance with the IMF

Egypt’s latest pledge to expand private sector participation represents the continuation of a decades-long pattern of economic reform promises made under pressure from international financial institutions. Since securing a $3 billion loan package from the IMF in 2022, Egypt has faced mounting pressure to reduce the outsized role of state-owned enterprises and the military in the economy. The government’s announcement, delivered by Prime Minister Mostafa Madbouly, signals recognition that meaningful progress on privatization has become a non-negotiable condition for continued international support.

This is not Egypt’s first rodeo with IMF-mandated reforms. The country has entered into multiple loan agreements with the Fund since the 1970s, each accompanied by similar commitments to liberalize the economy. Yet despite these repeated promises, the Egyptian state and military continue to control vast swaths of the economy, from cement production to tourism resorts. The persistence of this model reflects deep-seated political and economic interests that have proven remarkably resistant to change.

The Stakes Behind the Rhetoric

The timing of Madbouly’s announcement is hardly coincidental. Egypt faces a perfect storm of economic challenges: inflation remains stubbornly high, foreign currency reserves are under pressure, and the Egyptian pound has lost significant value against the dollar. The war in Ukraine has exacerbated these problems by driving up food and energy import costs for a country that relies heavily on wheat imports. Without IMF support and the international confidence it brings, Egypt risks a full-blown balance of payments crisis.

Yet the government’s commitment to “strengthening the role of the private sector” must contend with powerful vested interests. The military’s economic empire, which by some estimates accounts for up to 40% of the economy, has expanded significantly over the past decade. Military-owned companies enjoy tax exemptions, access to conscript labor, and preferential treatment in government contracts—advantages that crowd out private competitors. Any serious privatization effort would need to address these structural inequalities, a politically fraught proposition given the military’s central role in Egyptian politics.

Between Reform and Resistance

The language of “sustainable development” and “multiple economic and service sectors” in Madbouly’s statement suggests a cautious, incremental approach rather than the bold structural reforms the IMF likely envisions. This reflects a fundamental tension in Egypt’s political economy: the regime relies on state control of economic resources to maintain political stability and reward loyalists, yet it needs private investment and IMF support to address mounting economic pressures.

Previous attempts at privatization in Egypt have often resulted in crony capitalism, where state assets were transferred to regime-connected businessmen rather than genuinely competitive markets. The challenge now is whether Egypt can implement meaningful reforms that create space for genuine private sector growth while maintaining the political balances that keep the regime stable. The IMF’s leverage is considerable, but so is the Egyptian state’s capacity for cosmetic reforms that change little beneath the surface.

As Egypt navigates this latest round of negotiations with the IMF, the fundamental question remains: Can a political system built on state economic control truly embrace private sector-led growth, or will this prove to be another chapter in Egypt’s long history of promising reforms that never quite materialize?