Egypt will struggle to manage the electricity sector

Significance

The decision was not officially announced but quickly followed the IMF's completion of the third review of Egypt's loan programme. The gradual removal of subsidies is a key IMF benchmark, and consistent progress is likely required if Egypt is to access further disbursements. Besides its fiscal impact, the government also wants to encourage more efficient power consumption amid soaring demand due to rising temperatures.

Impacts

• The government will double down on efforts to encourage investment in renewable energy projects.
• Electricity shortages will constrain business activity.
• Egypt could suffer further disruptions in gas imports from Israel due to the security situation.
• Strong relations with international financial institutions will help the government secure renewable-energy finance.
• Public discontent will rise again once the government reinstitutes power cuts.