Net foreign assets (NFAs) in Egypt’s banking sector rebounded in September, reaching USD 20.8 bn, rising more than 16% (USD 2.9 bn) from August, which saw our NFA shrinking for the first time in three months, according to data from the Central Bank of Egypt. On an annual basis, our banking sector almost doubled its net foreign assets, from USD 10.3 bn in September 2024.

(Tap or click the headline above to read this story with all of the links to our background as well as external sources.)

Why do NFAs matter? Think of NFAs as the banking system’s core financial buffer — the net difference between the foreign currency banks hold (assets like USD and EUR) and what they owe to entities abroad (liabilities). A positive and growing NFA signals health: a strong capacity to cover import bills. In that case, the EGP will generally hold steady or even appreciate. But when NFAs shrink or turn negative, it means we owe more FX than we hold — and that’s when the EGP tends to slide against key foreign currencies.

Data breakdown: Commercial banks’ net foreign assets recorded a surplus of USD 9.8 bn in September, up from the USD 7.3 bn seen in August. Foreign assets in commercial banks increased to USD 41.7 bn, up from around USD 38.7 bn a month earlier, while liabilities marginally increased to USD 31.9 bn during the month.

The central bank recorded a surplus of nearly USD 11.1 bn by the end of September, up from USD 10.7 bn in August. Foreign assets rose to USD 48.6 during the month, slightly up from USD 48.1 bn a month earlier, while liabilities saw a small jump to USD 37.5 bn.

Behind the uptick: “The widening in the banking sector’s NFA was due to a significant hike in banks’ foreign assets,” HC Securities’ Heba Mounir told EnterpriseAM. This expansion was driven by several factors including a remarkable improvement in FX liquidity from tourism, record remittances inflows, and an uptick in FDI inflows, Mounir said.

More FX inflows are keeping the momentum going: “Since mid-year, we’ve been seeing strong cyclical liquidity flows — that’s why the EGP / USD exchange rate fell below 49 per USD and is now around 47. What’s happening now is a very natural reflection of that trend,” Al Ahly Pharos’ Hany Genena told EnterpriseAM.

Also helping: Foreign investors increasing their holdings of treasuries during the month and increased petroleum sector investments also boosted banks’ net foreign assets, she added.

Tags: