The strong buffers Egypt built heading into the Gulf war are allowing the Madbouly government to navigate from a stronger position

Egypt entered the Gulf crisis with the strongest external buffers in years, CBE balance of payments data through December 2025 shows (pdf). The current account deficit narrowed 13.6% to USD 9.5 bn in the first half of the state’s fiscal year thanks to surging remittances and the boom in tourism. The Suez Canal was handling more ships carrying more cargo — and foreign investors were piling back into Egyptian assets.

Why does it matter? In large part, the first-half BoP numbers are an exercise in history — the CBE’s own footnote makes clear that this covers “the period prior to the outbreak of the war in the region.” But they’re key to understanding why the Madbouly government had room to absorb the shock when it came. (The government’s fiscal year runs July through June, meaning the BoP report covers the period through 31 December 2025.)

Remittances were the headline: Transfers from Egyptians working abroad jumped 29.6% y-o-y to USD 22.1 bn, providing the single largest boost to the current account. Tourism revenues climbed 17.3% to USD 10.2 bn and Suez Canal receipts rose 19% to USD 2.2 bn.

The investor confidence story is just as important. Portfolio investment swung from a net outflow of USD 3.2 bn in the year-earlier period to a net inflow of USD 5.0 bn — a reversal that signals how far sentiment toward Egypt had shifted before the regional conflict upended emerging-market risk appetite. FDI hit USD 9.3 bn, driven by Qatari Diar’s USD 3.5 bn Alam El-Roum deal in 4Q 2025 alongside greenfield investment and reinvested earnings.

So why did the overall BOP deficit widen? The headline number — a USD 2.1 bn deficit, up from USD 502.6 mn — looks alarming in isolation, but most of the swing came from Egyptian banks building USD 9.7 bn in foreign assets abroad. The CBE frames this alongside a drop in new external borrowing as evidence of “reduced reliance on external borrowing” — essentially, the banking system was accumulating reserves rather than drawing down foreign credit lines.

The big thing to remember: The weak spots are structural, not cyclical. The oil trade deficit widened to USD 8.9 bn from USD 6.7 bn as Egypt imported more natural gas and crude. Sure, lots of that is for re-export (the natural gas piece in particular), but it is what it is. Meanwhile, the non-oil trade gap grew by USD 2 bn to USD 22.8 bn, with imports of cars, corn, soybeans, and electronics outpacing export growth in gold, appliances, and garments. Investment income payments — the cost of servicing foreign capital — edged up 7.7% to USD 9.9 bn. None of these are new vulnerabilities, but they underscore how reliant the improvement was on transfer and service income rather than trade competitiveness.

The bottom line: Strong policy moves last year saw Cabinet build strong buffers through to the start of the war — and holding the line since (especially keeping their fingers off the scale with the EGP) has burnished our credibility with the international community. The key now is holding the course — and hoping for a speedy resolution to the war in the Gulf.