Egypt’s Balance Of Payments Deficit Improves To $1.8B In July-March Period

Egypt’s overall balance of payments deficit narrowed to approximately $1.8 billion during the first nine months of fiscal year 2025/26, marking a 2.9% improvement compared to the same period last year.Egypt's foreign investmentsThe recovery was heavily anchored by the capital and financial account, which recorded net inflows of $9.9 billion, according to the latest data from the Central Bank of Egypt (CBE).A major driver behind these inflows was robust foreign direct investment (FDI), which generated a net total of $13 billion. This performance was boosted by the implementation of the Alam Al-Roum deal, which alone brought in around $3.5 billion during the October-December quarter.On the other hand, portfolio investments in Egypt recorded net outflows of approximately $4.4 billion. The CBE said the period coincided with the outbreak of conflict in the region, with the January-March 2026 quarter alone recording portfolio investment net outflows of about $9.5 billion, affecting earlier gains.Meanwhile, pressure mounted on the current account, which posted a deficit of roughly $14.6 billion. This was primarily driven by a 24.6% widening of the merchandise trade deficit, which climbed to around $47.8 billion.However, key sectors stepped in to cushion the pressure. Net current transfers skyrocketed by 31.1% to approximately $34.7 billion, fueled by a resurgence in remittances from Egyptians working abroad. Additionally, the services surplus rose 19.2% to $12.9 billion, lifted by strong tourism revenues and a steady recovery in Suez Canal transit receipts.In the first 11 months of the fiscal year, remittances increased by 31.2% to $43.1 billion, compared to around $32.8 billion during the same period last year. Easing inflation Egypt’s annual consumer price inflation slowed to 12.2% in June, down from 13% in May, as price increases across a range of food products continued to ease, according to data released last week by the Central Agency for Public Mobilization and Statistics (CAPMAS). On a monthly basis, consumer prices across Egypt declined 0.9% in June, driven by lower prices for meat and poultry, which fell 6.4%, dairy, cheese and eggs, which declined 2.4%, and vegetables, which dropped 12.1%. In Egypt’s urban areas, annual inflation eased to 14.3% in June, down from 14.6% in May. Growth outlookAt the end of June, the IMF said the conflict in the Middle East had a "relatively limited" impact on Egypt’s economy, crediting a series of timely and decisive policy measures, including fuel and electricity price adjustments, energy-saving initiatives across government entities, and a reprioritization of public spending.The IMF also said Egypt’s economy continued to post solid growth, with real gross domestic product (GDP) expanding 5% in the third quarter of fiscal year 2025-26, bringing average growth to 5.2% over the first three quarters of the fiscal year. Earlier in June, Standard Chartered said it expects Egypt’s economic recovery to gather pace in fiscal year (FY) 2026-27, forecasting gross domestic product (GDP) growth of 4.7% as easing inflation, improving macroeconomic conditions, and continued reforms support investment and private sector activity.The bank expects Egypt’s economy to expand by 3.6% in FY 2025-26 before accelerating in FY 2026-27, while policy rates are expected to continue declining through 2028, supporting credit growth and financing activity.