Arab Finance: Egypt’s energy subsidy reforms have helped reduce economic vulnerabilities and given policymakers greater flexibility, the International Monetary Fund (IMF) said in its Regional Economic Outlook for the Middle East and Central Asia, released on October 22.

The report cited Egypt, Bahrain, and the UAE as countries where changes to energy subsidies over recent years have reduced vulnerabilities. It urged economies across the region to build on these gains by strengthening their energy pricing frameworks.

Such frameworks should reflect movements in international price benchmarks, limit the fiscal burden of higher energy costs, and preserve incentives for more efficient consumption, the IMF said. It stressed that these reforms should be accompanied by expanded social protection programs targeting the most vulnerable households.

The assessment comes after Egypt's Fuel Automatic Pricing Committee (FAPC) kept fuel prices unchanged on October 15. The committee reviewed exchange rate movements and Brent crude prices during July–September 2026 against the preceding quarter before deciding to maintain existing prices.

Egypt adjusted fuel prices six times between its 2024 agreement with the IMF and March 2026.

Beyond energy policy, the report examined how regional economies have weathered the conflict involving Iran. Gross domestic product (GDP) growth in Egypt, Jordan, Morocco, Pakistan, and Tunisia during the first half of 2026 remained broadly consistent with the levels recorded in the second half of 2025.

For Egypt, continued growth in remittances and strong tourism revenues helped sustain economic activity despite the conflict’s repercussions. Net remittances as a share of GDP exceeded their level in the corresponding period a year earlier, according to the IMF.

Tourism also held up across much of the region’s oil-importing economies, contrasting with developments in Gulf Cooperation Council countries. In Egypt, Morocco, Tunisia, and Pakistan, which remained largely insulated from the conflict, hotel occupancy rates were stable or higher than a year earlier.

Exchange rate flexibility provided another source of resilience, helping Egypt adjust to external pressures. The report noted that the pound’s nominal effective exchange rate declined by approximately 6% between February and August 2026.

Earlier in October, the IMF raised its forecast for Egypt’s GDP growth in fiscal year (FY) 2026/2027 to 4.7%, compared with the 4.4% projected in July. It estimated that the economy expanded by 5.1% in the fiscal year that ended in June 2026, in line with the Egyptian government’s estimate.