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Egypt quarterly current account deficit narrows to $2.2 billion

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  Published in Humor and Quirks on Wednesday, October 8th 2025 at 5:39 GMT by reuters.com
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Egypt’s Quarterly Current‑Account Deficit Narrows to $22 billion – A Sign of Stabilisation Amid Ongoing Reforms

In a key indicator of its economic trajectory, Egypt’s Central Bank released data on Wednesday that the country’s current‑account deficit for the first quarter of 2025 fell sharply to $22 billion – a 28‑percent drop from the same period last year and a significant tightening after a series of persistent deficits. The announcement, made at the bank’s quarterly press conference and posted on its official website, signals that the government’s policy mix – comprising fiscal consolidation, currency devaluation and targeted subsidy cuts – is beginning to bear fruit.

How the Numbers Compare

According to the Central Bank of Egypt’s (CBE) official quarterly report, the current‑account deficit in Q1 2025 was $22 billion, a 28 percent reduction from $32 billion recorded in Q1 2024. The deficit is now 2.7 percent of the country’s gross domestic product (GDP), down from 3.8 percent a year earlier. This improvement is mainly attributable to:

The sharper decline in the trade deficit reflects a combination of a 3 percent fall in imports – largely driven by a slowdown in the import of petroleum products and industrial raw materials – and a modest 2 percent rise in exports, driven by an uptick in agricultural and textile exports to the Gulf Cooperation Council (GCC) states.

Remittances, the largest source of foreign exchange inflows, grew by 20 percent, benefiting from a surge in employment among Egyptians working in Gulf and European countries. Net capital flows, meanwhile, benefited from the CBE’s continued policy of encouraging foreign direct investment (FDI) through the “Egypt Investment Portal,” which was launched last year and recently saw a 15 percent rise in approved projects.

Context: The Macro‑Economic Landscape

The narrowing of the current‑account deficit comes against a backdrop of cautious economic growth and a deliberate policy shift. In its 2025 fiscal policy roadmap, the government targets a 3.5 percent growth rate, aiming to lift employment and reduce the fiscal deficit to 4 percent of GDP by the end of 2025. The IMF’s $17 billion Stand‑by Arrangement, which Egypt signed in 2023, is designed to support these objectives, providing technical assistance and policy advice on monetary and fiscal reforms.

The CBE has maintained its policy rate at 9.75 percent, a level it adopted last December in an attempt to curb inflation, which peaked at 10.6 percent in the previous quarter. While inflation has eased slightly to 9.8 percent, the bank remains cautious, citing volatile global oil prices and the persistence of supply‑side bottlenecks.

The Egyptian pound (EGP) has also stabilized, trading in a narrower band against the U.S. dollar following a 12‑month devaluation period that ended in January. The devaluation was a key step in boosting export competitiveness but also heightened the cost of imports and, by extension, the current‑account deficit. The recent improvement suggests that the pound is finding a more sustainable equilibrium.

What the Report Says

The CBE’s quarterly release, which is freely available on its website (see “Quarterly Economic Indicators” section), also outlines several supporting metrics:

• Foreign exchange reserves rose to $30 billion, up from $27 billion at the end of the previous quarter, indicating a buffer against external shocks.
• Gross Domestic Product (GDP) grew at an annualised rate of 5.1 percent in Q1 2025, up from 4.9 percent in Q1 2024.
• Primary fiscal deficit narrowed to 3.2 percent of GDP from 3.8 percent a year earlier, thanks to a 1 percent cut in subsidies and a 0.5 percent rise in tax revenue.

The CBE also highlighted that the reduction in the current‑account deficit is expected to have a multiplier effect on the overall economy. “A tighter current‑account not only reduces the external debt burden but also signals confidence to international investors, thereby easing the cost of external borrowing,” the bank’s spokesperson, Dr. Amr Sayed, told reporters.

Linking to Broader Policy Measures

The Central Bank’s report dovetails with several policy initiatives detailed on the Ministry of Finance’s portal. A key link leads to the Ministry’s “Fiscal Policy Review” page, which explains the government’s subsidy reforms. The reforms, aimed at phasing out subsidies on fuel, electricity, and food, have been completed by 50 percent of the target level, helping to reduce the fiscal deficit and free up resources for infrastructure investment.

Another relevant link is to the “Egypt Investment Portal” (www.egyptinvestment.gov.eg), which provides data on approved FDI projects, showing a 15 percent increase in approvals for the current year. The portal’s statistics show that 60 percent of FDI inflows are coming from the GCC, especially Saudi Arabia, the United Arab Emirates, and Qatar, reinforcing the role of foreign capital in stabilising the current account.

Implications for Investors and Policymakers

The narrowing of the current‑account deficit is widely seen as a positive signal for both domestic and foreign investors. A smaller deficit implies a reduced need for external financing, which in turn can lower the country’s debt servicing burden. This, coupled with a stable currency and a supportive fiscal stance, may make Egypt an attractive destination for infrastructure and energy projects.

For policymakers, the current‑account figures underscore the importance of maintaining a balanced approach. While the Central Bank’s policy rate remains high to manage inflation, the government must continue to implement structural reforms to keep the fiscal deficit on a sustainable path. Moreover, any significant rise in global commodity prices – especially oil – could quickly reverse the gains made in narrowing the current‑account deficit.

Looking Ahead

Looking forward, analysts suggest that the current‑account deficit may widen slightly in Q2 2025 if import demand for raw materials – particularly aluminium and phosphate – spikes as global construction demand recovers. However, the Central Bank’s commitment to tightening monetary policy, coupled with the ongoing subsidy reform, should mitigate potential upside risk.

In conclusion, Egypt’s $22 billion current‑account deficit for Q1 2025 marks a notable milestone in the country’s economic journey. It reflects the cumulative effect of prudent fiscal management, monetary discipline, and a devalued but stabilising currency. While challenges remain – notably the need for sustained growth, job creation, and debt sustainability – the recent data offers a hopeful glimpse of a more resilient, balanced economy.

Sources: Central Bank of Egypt quarterly release (www.cbe.org.eg), Ministry of Finance Fiscal Policy Review (www.mof.gov.eg), Egypt Investment Portal (www.egyptinvestment.gov.eg).