Egypt’s external position showed a measured but notable improvement in the first half of FY 2025/2026, with the Central Bank of Egypt reporting a 13.6% decline in the current account deficit to $9.5 billion, compared to $10.9 billion in the same period a year earlier. The improvement reflects stronger foreign currency inflows, particularly from remittances and services, although structural imbalances in trade continue to weigh on the overall balance.
Remittances and services
The primary driver behind the improved current account position was a surge in transfers and services receipts. Net unrequited transfers rose 28.4% to $22 billion, supported by a 29.6% increase in remittances to $22.1 billion, signaling a return of flows through formal channels following exchange rate adjustments.
The services balance also strengthened, recording a 20.6% increase in surplus to $8.9 billion. Tourism revenues climbed 17.3% to $10.2 billion, while Suez Canal transit receipts rose 19.0% to $ 2.2 billion, reflecting higher traffic and improved global trade flows during the period.
“The improvement in the current account (pre-Iran war) was driven by the blend of higher tourist arrivals and spending per night, the improved performance of exports driven by some business-related reforms, and the significant increase in remittances as more Egyptians returned to the official foreign exchange market,” said Reham ElDesoki, Senior Economic and Investment Strategy Consultant with nearly three decades of experience in local and international organizations in research, investment advisory and public policy, former Chief Strategy Officer of The Sovereign Fund of Egypt, and former advisor to Egypt’s Minister of Planning and Economic Development to Business Monthly.
She adds that gains in services were also supported by early signs of growth in IT-related exports, indicating a gradual diversification of Egypt’s external revenue base.
Trade pressures persist
Despite these gains, Egypt’s trade balance remains a key structural challenge. The oil trade deficit widened to $8.9 billion, driven by higher import volumes, with oil imports rising to $11.6 billion while exports declined to $2.6 billion.
Similarly, the non-oil trade deficit expanded to $22.8 billion, as imports surged $4.5 billion to $41.1 billion, outpacing export growth, which rose $2.5 billion to $18.3 billion. At the same time, the investment income deficit increased 8.0% to $8.6 billion, reflecting higher external payment obligations.
Strong capital inflows
On the financial account, Egypt recorded a net inflow of $6.5 billion, supported by robust foreign investment activity. Foreign direct investment rose significantly to $9.3 billion, largely driven by non-oil sectors and a $3.5 billion Alam El-Roum transaction, while portfolio investment rebounded to a net inflow of $5 billion, compared to a net outflow a year earlier.
However, a $9.7 billion increase in banks’ foreign assets partially offset these inflows, contributing to an overall balance of payments deficit of $2.1 billion, compared to $502.6 million in the previous year.
Structural momentum
While part of the improvement reflects structural progress, underlying vulnerabilities remain. ElDesoki notes that export growth, although improving, remains sensitive to external demand conditions and domestic cost pressures, including inflation and input availability.
Tourism, however, appears more resilient, supported by expanding capacity and relative insulation from regional geopolitical tensions. By contrast, the recent surge in remittances may prove less durable as the effects of exchange rate liberalization stabilize and labor market dynamics in key host countries evolve.
Looking ahead, ElDesoki expects the full economic impact of regional tensions to become more visible in the next fiscal cycle starting July 2026. She notes that the current account could face renewed pressure as energy imports rise in cost and external inflows moderate.
“The current account deficit could worsen as a result of the ongoing conflict as more expensive energy imports increase and remittances and exports potentially dip.”
Investment outlook
Despite near-term risks, Egypt’s long-term investment case remains intact. Opportunities continue to emerge across infrastructure, manufacturing, logistics, healthcare, education, and technology, supported by strong domestic demand and nearshoring potential.
ElDesoki emphasized that investor sentiment is anchored in long-term fundamentals rather than short-term volatility, and that sustaining reform momentum with proven results is critical to maintaining confidence.
