Egypt recorded a $2.8 billion balance-of-payments (BoP) surplus in FY2025/26, reversing a $2.1 billion deficit in the previous fiscal year, as stronger investment inflows and remittances helped offset a widening current-account deficit.
According to the Central Bank of Egypt’s (CBE) Balance of Payments Performance During FY2025/2026 report, the capital and financial account recorded net inflows of $23.2 billion, up from $10.2 billion a year earlier. Net foreign direct investment (FDI) increased to $18 billion from $12.2 billion, while portfolio investment registered a net inflow of $4.2 billion, compared with $1.6 billion.
However, the current-account deficit widened to $22.5 billion from $15.4 billion. The merchandise trade deficit increased 27.1% to $64.8 billion, while the investment income deficit grew 33.8% to $21.2 billion, according to the CBE.
For Hany Genena, Head of Research at Al Ahly Pharos, the headline surplus reflects stronger capital and financial inflows, although its accounting components require clarification.
A return to surplus
Egypt’s BoP performance has experienced considerable volatility over the past four fiscal years.
According to the CBE’s annual BoP reports, Egypt recorded an overall surplus of $882.4 million in FY2022/23, followed by a $9.7 billion surplus in FY2023/24. The latter was supported by exceptional inflows associated with the $35 billion Ras El-Hekma agreement and $14.5 billion in portfolio investment inflows.
The subsequent fiscal year recorded a $2.1 billion deficit as exceptional inflows subsided, despite improvements in remittances and tourism revenues.
The $2.8 billion surplus in FY2025/26 therefore marks a return to positive territory, although it remains significantly below the FY2023/24 peak.
The CBE’s reserve data also indicate a strengthening external buffer. Net international reserves (NIR) reached $55.07 billion at the end of June 2026, compared with $48.7 billion at the end of June 2025, representing an increase of approximately $6.4 billion, or 13.1%.
The CBE subsequently reported that NIR reached $57.4998 billion at the end of October 2026, on a provisional basis, indicating continued reserve accumulation after the fiscal year ended.
What the surplus means
“The term balance of payments surplus is a bit of a misnomer. It’s a sort of an invention that we all use to explain the following,” Genena said.
“Balance of payments has to be always equal to zero by definition,” he explained.
According to Genena, the overall balance is calculated by excluding changes in the Central Bank of Egypt’s foreign reserve assets. This allows the reported surplus or deficit to reflect the difference between foreign-currency inflows and outflows before the corresponding reserve movement.
In FY2025/26, the $22.5 billion current-account deficit was offset by stronger capital and financial inflows. The CBE reported a $23.2 billion net inflow in the combined capital and financial account, alongside positive net errors and omissions, resulting in the $2.8 billion overall surplus.
The corresponding reserve movement completes the accounting. The CBE records reserve accumulation with a negative sign because acquiring foreign assets represents an outflow of funds.
“The negative sign reflects the flow of funds, the direction,” Genena explained.
He said the central bank can use the surplus to acquire foreign assets, including gold and U.S. Treasury securities, pointing to “buying gold, buying treasury, US treasuries and the like.”
The negative figure therefore reflects reserve accumulation rather than a decline in reserves.
FDI supports external position
FDI was a major contributor to the improvement. According to the CBE’s FY2025/26 BoP report, non-oil sectors attracted $17.8 billion in net inflows, including $8.8 billion from greenfield investments and capital increases by existing companies.
The CBE attributed $3.5 billion of the latter category to the Alam Al-Roum deal during October–December 2025.
Reinvested earnings increased to $6.2 billion from $4.2 billion, while non-resident purchases of Egyptian real estate generated $2.8 billion in net inflows, compared with $1.9 billion in FY2024/25.
FDI in the oil and mineral resources sector recorded a net inflow of $190.2 million, bringing total net FDI to approximately $18 billion.
The breakdown suggests that FDI growth was not driven exclusively by new projects. Reinvested earnings and real estate purchases also represented substantial components of total inflows.
The $3.5 billion associated with Alam Al-Roum accounted for approximately 40% of greenfield investments and capital increases, highlighting the influence of large transactions on the annual figures.
Genena described FDI during the year as “exceptionally higher than normal,” while also identifying portfolio investment as an important contributor to the overall surplus.
Portfolio investment registered a net inflow of $4.2 billion, according to the CBE. However, the detailed figures showed a $935 million net outflow from bonds, indicating that the overall portfolio inflow was supported by other transactions.
Current-account deficit widens
Genena uses the basic balance, which combines the current-account balance with net FDI, to assess whether relatively sustainable investment flows can finance external deficits.
He said Egypt has historically attracted around 11billion-12 billion in annual FDI.
“A current account deficit of around $12 billion, which is very close to around 2% of GDP, is usually sustainable because we can fund it easily by FDI inflows,” he said.
At $22.5 billion, the FY2025/26 deficit was almost twice that benchmark.
“That’s why $22 billion is sort of double the amount that could be sustainably funded by FDI,” Genena said.
He added that financing a gap of this size requires additional investment and exceptional inflows through initial public offerings (IPOs), privatization and other investment-attraction initiatives.
Trade remained a major source of pressure. According to the CBE, non-oil imports increased 16.9% to $83.9 billion, with intermediate goods accounting for 55.2% of the increase. Non-oil exports grew 7.8% to $37.3 billion, supported by vegetables, gold, garments and household appliances.
The oil trade deficit also widened to $18.3 billion as higher natural gas and crude oil imports outweighed export growth.
The investment income deficit increased as payments to foreign investors and lenders rose, reflecting continued pressure from external obligations and investment-related income transfers.
Remittances and tourism generate foreign currency
Remittances from Egyptians abroad increased 29.6% to $47.3 billion, while tourism revenues grew 10.3% to $18.4 billion. Suez Canal transit receipts also rose 21.6% to $4.4 billion, according to the CBE.
Genena considers tourism and remittances important sources of foreign currency, reflecting Egypt’s comparative advantages.
“I don’t see this as a bad thing, to be honest,” he said, arguing that Egypt should continue investing in sectors in which it has established advantages rather than attempting to replace them with less competitive activities.
He pointed to hotel occupancy rates of around 70%-80% across many Red Sea properties, even amid regional instability. As an example, he recalled visiting a hotel in Sahl Hasheesh during a period of regional military operations, where he was told that occupancy stood at around 80%. He also noted the presence of American, European and Chinese visitors, alongside Egyptian guests.
Genena argued that tourism can generate substantial foreign-currency earnings while relying on operating costs that are largely denominated in Egyptian pounds.
“It is a dollar generating asset,” he said, noting that hotels sell much of their foreign currency to the government or banks, making the sector a source of dollar liquidity for the wider economy.
Rather than reducing reliance on tourism, he advocated investing in a broader range of tourism activities.
“We need to invest more to reduce the volatility,” he said, identifying cultural, educational and medical tourism as opportunities to diversify beyond conventional leisure and beach tourism.
Diversifying export revenues
Beyond tourism, Genena identified textiles, logistics and education as potential sources of foreign-currency earnings, although their net contributions differ.
Egypt’s textile industry has some competitive advantages from relatively affordable labor and the exchange-rate environment. Genena estimated that the sector generates around 2.5billion-2.7 billion in annual exports. However, he argued that much of its production relies on imported raw materials, limiting the foreign currency retained from export proceeds.
He also pointed to chemical industries and fertilizers, including urea, as potential export contributors, while cautioning that their revenues remain exposed to international commodity cycles.
Vehicle and mobile-phone assembly could also support exports to African markets, but Genena argued that their net foreign-currency contribution would remain relatively limited where production depends heavily on imported components.
Food manufacturing presents a similar challenge. He cited companies including Juhayna, Domty and Obour Land, noting that despite exporting to markets in the Gulf, Africa and parts of Europe, their reliance on imported inputs such as milk powder can leave them as net users of foreign currency.
Logistics, meanwhile, represents a sector with significant potential.
Genena described logistics as “a net generator of foreign currency,” arguing that Egypt’s geographic position and growing role as a regional trade hub could support the expansion of services paid for largely in dollars while much of their operating costs remain denominated in Egyptian pounds.
He also identified education as an opportunity to generate service-export revenues. Attracting international students who pay tuition in foreign currency could create an additional source of dollar inflows, particularly at universities where faculty and operational costs are largely paid in Egyptian pounds.
Productivity and scale
Genena said improving export competitiveness requires investment in education, workforce training and productivity.
“I think education and training are central,” he said, explaining that a more skilled workforce would help Egyptian companies expand into higher-value services, including legal, consultancy and engineering services, and command higher international fees.
He also emphasized labor productivity and the scale of operations as essential conditions for manufacturing competitiveness.
According to Genena, companies need to operate at a sufficient scale to distribute fixed costs across larger production volumes. He cited Chinese manufacturers as an example of how producing substantially greater quantities allows companies to lower unit costs and compete on price.
“If you do not have scale, if you do not have labor productivity, it’s very difficult to compete, very difficult,” he said.
Sustaining the external surplus
Maintaining a BoP surplus in FY2026/27 will require Egypt to expand recurring foreign-currency earnings while reducing its reliance on exceptional investment transactions and portfolio inflows.
Genena’s assessment points to the need to attract more sustainable FDI, particularly into productive and export-oriented activities, while continuing to invest in sectors where Egypt has comparative advantages.
Tourism could generate higher revenues through additional hotel capacity and diversification into cultural, educational and medical travel. Logistics and international education could also create new service-export revenues, while improvements in workforce skills and production scale would help domestic manufacturers compete internationally.
The widening current-account deficit nevertheless highlights the importance of increasing the domestic value retained from exports. Expanding local production of intermediate inputs, reducing import dependence and developing higher-value services could strengthen the net foreign-currency contribution of economic activity.
Egypt’s FY2025/26 BoP surplus reflects stronger investment inflows and foreign-currency receipts, but the widening current-account deficit highlights the need to expand sustainable sources of external earnings. Improving export competitiveness, increasing local content and developing higher-value services will remain important to reducing reliance on exceptional capital inflows.
