Egypt’s current account deficit is projected to come in 1.2 percentage points higher than previously forecast, coming in at 3.4% of GDP this fiscal year and by 0.6 percentage points more than previously thought for the next fiscal year at 2.5%, according to a recent report from Fitch Solutions’ research unit BMI. Despite downward revisions, the current account deficit for both years are still projected to fall from the previous fiscal year and remain below the ten-year average. The research firm pointed to a deteriorating external position amid the US-Iran conflict on the back of a triple threat of higher energy bills, a tourism slowdown, and a stalled recovery for the Suez Canal.

The headwinds: Disruptions to regional gas supplies are expected to add USD 2-4 bn to Egypt’s import bill, while Suez Canal transit tonnages remain standard at 30-35% of pre-crisis levels, and tourism arrivals from key European markets — which typically account for over half of all visitors — slow down.

The liquidity squeeze: The conflict has triggered USD 8-9 bn in foreign portfolio outflows since mid-February. These outflows, combined with a heavier debt maturity profile in March and April 2026, are intensifying external financial pressures. However, the Central Bank of Egypt is currently utilizing its USD 13.7 bn in FX deposits parked at commercial banks as a primary buffer to shield official state reserves.

The worst-case scenario: A prolonged conflict could push the deficit to 4.4% of GDP and force harsh domestic adjustments, although BMI’s baseline assumes a short-lived conflict with oil averaging USD 72 / bbl. However, if the war drags on and pushes oil prices to a high-case scenario of USD 110-130 / bbl, the intense financial strain would make domestic adjustments — including further subsidy rollbacks, fiscal measures, and potential return to rate hikes — inevitable.

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