Egyptian expats are doing the heavy lifting for the current account

Egypt’s current account deficit narrowed by a significant 45.2% y-o-y to USD 3.2 bn in 1Q FY 2025-26, down from USD 5.9 bn a year earlier, according to recently released figures (pdf) from the Central Bank of Egypt. The uptick was driven by a near 30% y-o-y rise in remittances to over USD 10 bn and an increase in the services surplus on the back of tourism and Suez Canal revenues.

But while the current account healed, the balance of payment deficit widened 61.4% to USD 1.6 bn, up from USD 991.2 mn a year earlier. Driving the disparity was not capital flight, but local banks restocking local currency buffers. The USD 3.8 bn of inflows recorded in the three-month period last year were replaced by a USD 366.5 mn outflow at the start of this fiscal year as banks increased their foreign assets by USD 5.3 bn.

Why it’s important: Remittances have never been more important to the country’s economic health, with the USD 10.8 bn (up 29.8% y-o-y) sent from workers abroad in the first quarter of the fiscal year — nearly double the USD 5.5 bn from tourism (up 13.8% y-o-y) and ten times the USD 1.1 bn brought in by the Suez Canal (12.4%).

Despite the Suez Canal still having a way to go on its recovery, “this is the highest quarterly revenue since the outbreak of the crisis, surpassing the USD 1 bn mark for the first time during this period,” Thndr’s Esraa Ahmed tells EnterpriseAM. This represents “an encouraging development reflecting a relative improvement in shipping traffic,” she added.

The non-oil trade deficit also narrowed 4.0% to USD 9.5 bn, supported by a USD 1.9 bn jump in export proceeds to USD 9.8 bn — concentrated in gold, electronics, agricultural products, and ready-made garments — that helped outweigh a smaller USD 1.5 bn increase in non-oil imports to USD 19.3 billion.

But energy import costs are increasing their strain on the deficit, with the oil trade deficit up nearly USD 1 bn to USD 5.2 billion as oil imports rose USD 1.0 bn to USD 6.4 bn. In contrast, oil exports inched up only USD 63.6 mn to USD 1.3 bn as oil product and natural gas exports slightly outpaced a fall in crude exports.

The investment income deficit also weighed down the headline figure, rising 2.3% over the period to USD 4.4 bn as interest payments and transfers outpaced investment returns from abroad. The rate of foreign investment also slowed, coming in at USD 2.4 bn for the quarter, down from USD 2.7 bn the year before. “FDI came in at its usual average levels during periods that do not witness major transactions, exits, or exceptional investments, with no unusual inflows recorded,” Ahmed said.