At its previous meeting on 2 April, the committee decided to maintain the overnight deposit rate at 19%, the overnight lending rate at 20%, and both the credit and discount rate and the main operation rate at 19.5%.

In its accompanying statement, the MPC said the decision reflected an assessment of recent inflation developments and outlooks, noting that the path towards achieving its inflation target of 7% (±2%) by the fourth quarter of 2026 faced increasing upside risks. These included the possibility of prolonged regional conflict and stronger-than-expected impacts from fiscal adjustment measures.

Earlier this month, the Central Bank of Egypt reported that monthly core inflation, measured by the bank, slowed to 1.1% in April 2026 from 2% in March, while annual core inflation eased to 13.8% from 14%.

The monthly headline urban consumer price index, published by the Central Agency for Public Mobilization and Statistics (CAPMAS), also rose 1.1% in April, compared with 3.2% in March, while annual urban inflation slowed to 14.9% from 15.2%.

Cautious hold

Mohamed Abdel Aal, a banking expert, said the upcoming MPC meeting comes amid broad debate over the future trajectory of interest rates following a period of sharp regional and international volatility that temporarily reignited inflation concerns before price indicators resumed easing at a faster pace than many analysts had expected.

Abdel Aal said that while some observers believe the central bank could return to raising rates in response to escalating geopolitical risks and higher inflation forecasts in its latest reports, a deeper assessment of economic and monetary indicators suggests that maintaining rates unchanged remains the more likely scenario, alongside a temporary pause in the easing cycle.

“In the current phase, the central bank may prefer a ‘cautious hold’ rather than a return to monetary tightening,” he said.

“At first glance, the latest monetary policy report appears more hawkish after the central bank raised its average inflation forecasts to 16% in 2026 and 12% in 2027, compared with significantly lower earlier estimates,” Abdel Aal added. “The report also highlighted persistent upside risks linked to regional conflict, energy prices, shipping disruptions and the possibility of tighter global financial conditions.”

However, he argued that these factors alone are insufficient to justify another rate increase for three main reasons.

“The first is that the central bank raised expectations, not current realities; and that distinction is important,” he said. “The latest report did not suggest inflation had spiralled out of control, but rather that upside risks could materialise if external shocks persist.”

He noted that recent data showed annual headline inflation slowing to 14.9% and core inflation easing to 13.8%, alongside a clear moderation in monthly inflation readings, indicating that actual inflationary pressures remain less severe than precautionary scenarios imply.

According to Abdel Aal, the second factor is the reassuring signal from core inflation.

“Headline inflation can be affected by temporary factors such as food, energy, transport costs and geopolitical shocks, whereas core inflation – which excludes the most volatile components – is viewed as the clearest measure of entrenched inflationary pressures,” he said.

He added that the decline in monthly core inflation from 2% to 1.1%, and annual core inflation from 14% to 13.8%, suggests Egypt has not yet entered a phase of deeply entrenched inflation, while the transmission of external shocks into broader prices remains relatively contained.

The third factor, he said, is that Egypt’s current monetary policy stance is already highly restrictive.

“Real interest rates in Egypt have become clearly elevated relative to current and expected inflation, particularly after inflation slowed in recent months,” Abdel Aal said. “In addition, the effects of previous tightening cycles have not yet fully materialised due to the lag in monetary policy transmission.”

He explained that the impact of higher interest rates emerges gradually over time and is already reflected in weaker demand, slower consumer credit growth, subdued private-sector activity and a decline in the purchasing managers’ index (PMI), indicating softer domestic demand and reducing the need for further tightening.

Abdel Aal also stressed that the Central Bank of Egypt no longer relies solely on official rate adjustments to absorb liquidity and tighten monetary conditions.

He noted that the central bank has increasingly allowed state-owned and private banks to issue high-yield savings products, helping absorb excess liquidity, support pound-denominated savings, curb dollarisation and speculation, and strengthen the attractiveness of the local currency without direct rate hikes.

“As a result, the central bank has effectively achieved part of the tightening effect through indirect and more flexible savings instruments, at a lower cost to economic activity than repeated official rate increases,” he said.

Despite the recent moderation in inflation, Abdel Aal believes the central bank is unlikely to rush into resuming rate cuts given ongoing external risks.

“The war has not fully ended, foreign portfolio flows remain vulnerable to volatility, and even the US Federal Reserve has not shifted decisively towards easing,” he said. “Cutting rates now could signal greater tolerance for inflation, potentially placing pressure on the exchange rate and affecting foreign inflows.”

He therefore sees the most probable outcome as a “cautious hold”, rather than either renewed tightening or a rapid return to easing.

Abdel Aal also suggested that the central bank could extend the timeframe for achieving its inflation targets.

“This is a significant possibility and perhaps one of the most likely developments in the coming period,” he said. “Given geopolitical shocks, energy price volatility and global economic conditions, the central bank may move towards extending the timeline for achieving inflation targets without materially changing the targets themselves.”

“In light of these factors, current policy appears closer to carefully balancing inflation control with preserving growth and monetary stability,” he added. “Accordingly, the MPC may conclude that maintaining existing monetary conditions is sufficient at this stage.”

Monetary balance and banking sector stability

Shaimaa Wagieh, a banking expert, also expects the Central Bank of Egypt to keep rates unchanged, viewing such a decision as part of a strategy aimed at preserving monetary balance and banking sector stability amid persistent global inflationary pressures and uncertainty in international markets.

Wagieh said maintaining rates reflects an approach based on evaluating the cumulative impact of previous tightening cycles, which raised yields and strengthened the attractiveness of savings products while supporting liquidity stability within the banking sector.

She added that stable rates provide banks with greater flexibility in managing funding costs, particularly following increases in the cost of deposits and savings certificates, which directly affect lending costs and financing conditions.

“The hold also reflects monetary policy’s commitment to balancing inflation control with avoiding additional financing burdens on different economic sectors,” she said, noting that further increases could raise borrowing costs for companies and productive sectors, weighing on expansion, investment and credit demand.

From a banking perspective, Wagieh said stable interest rates support banks’ ability to restructure credit portfolios and manage assets and liabilities more efficiently. They also help preserve money market stability and enable financial institutions to plan cash flows more effectively amid continued challenges linked to exchange rates, global markets and energy prices.

She added that maintaining current yield levels supports the attractiveness of local debt instruments without increasing borrowing costs for the state budget.

According to Wagieh, the current phase remains focused on balancing monetary stability with support for economic activity, while preserving the resilience of the banking sector and its ability to finance different segments of the economy.

Economic developments and geopolitical pressures

Meanwhile, the research department at HC Securities and Investment expects the CBE to leave rates unchanged, citing recent macroeconomic developments and geopolitical risks.

Heba Mounir, the company’s macroeconomics analyst, said regional tensions linked to the US-Israeli war against Iran continue to affect both the global economy and Egypt, although Egypt’s external position and exchange-rate flexibility have helped absorb the impact so far.

“Despite foreign investors withdrawing around $3.2bn in hot money from Egypt’s secondary treasury market between 19 February and the end of April, net foreign reserves increased by a combined $263m during March and April to reach a record $53bn in April,” she said.

At the same time, deposits excluded from official reserves declined by $2.6bn over the same period to $10.8bn, while the banking sector’s net foreign assets fell to $21.3bn in March, largely reflecting foreign outflows from treasury instruments.

This contributed to an approximately 10% depreciation in the Egyptian pound since the start of the year, reaching EGP 52.9 against the US dollar by 15 May, reflecting exchange-rate flexibility.

Mounir also highlighted domestic inflationary pressures, including a roughly 19% increase in diesel, butane gas cylinder and petrol prices in March, followed by higher industrial natural gas prices in May and a 5% increase in wheat prices to $244 per tonne.

“These developments are adding pressure to foreign currency liquidity and, in our view, will contribute to higher inflationary pressures,” she said.

To ease pressure on the local currency and absorb liquidity, several state-owned banks introduced new three-year certificates with yields raised by around 1.25 percentage points to an average of 17.25%, prompting some private banks to offer similar products.

“This represents indirect tightening that could help contain inflationary pressures while supporting pensioners who depend on high-yield certificates,” she added.

Regarding treasury bill yields, Mounir said returns have generally moved higher to preserve attractiveness, with the latest 12-month treasury bill auction yielding 24.4%.

“This reflects a positive real interest rate of 4.57% based on our 12-month inflation estimate of 16%, after deducting a 15% tax for European and American investors,” she said.

“Accordingly, given geopolitical risks and their implications for Egypt’s foreign currency resources, our revised inflation forecasts, the need to preserve the attractiveness of treasury investments and fiscal deficit targets, we expect the MPC to keep rates unchanged tomorrow,” she added.

Inflation concerns remain

A Reuters poll also indicated expectations that the Central Bank of Egypt will leave overnight interest rates unchanged at Thursday’s meeting, amid continued concerns over inflationary pressures linked to the US-Israeli war against Iran.

Fifteen of sixteen economists surveyed expected the MPC to maintain the deposit rate at 19% and the lending rate at 20%, while only one forecast a 100-basis-point increase.

Abu Dhabi Commercial Bank (ADCB) said in a note that real interest rates, which remain elevated at around 5%, provide sufficient room to absorb higher near-term inflation expectations.

The bank added that the relative stability of the Egyptian pound in recent weeks, supported by temporary capital inflows, is likely to help anchor inflation expectations and limit imported inflation pressures.

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According to a presidential statement, the meeting assessed Egypt’s economic reform programme and the impact of regional conflicts on inflation, external balances, and capital flows. Inflation had eased from a peak of 38% to around 11% before the latest crisis, while net international reserves reached a record $53bn in April 2026.

The reserves are sufficient to cover approximately 6.3 months of imports and represent about 158% of Egypt’s short-term external debt, underscoring the country’s strengthened external position.

Governor Abdalla reaffirmed the central bank’s commitment to maintaining a flexible exchange rate policy to absorb external shocks and preserve stability. He also reviewed preparations for Egypt’s hosting of the 33rd annual meetings of the African Export-Import Bank (Afreximbank) in El Alamein this June, an event held under presidential patronage.

Abdalla noted that hosting Afreximbank reflects Egypt’s commitment to advancing African economic integration, expanding trade, and promoting sustainable development.

President Al-Sisi instructed officials to accelerate efforts toward fiscal sustainability, strengthen financial discipline, and improve debt management to free up resources for public services and human development. He also emphasized the importance of continuing to build reserves and contain inflation.

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Annual non-food inflation declined to 20.1% in April from 21.5% in March, helping drive the overall slowdown. In contrast, annual food inflation accelerated to 6.7%, compared with 5.8% a month earlier, largely due to an unfavourable base effect and a sharp increase in volatile food inflation to 26.2% from 15.9%, despite slower growth in core food prices.

On a monthly basis, urban headline inflation eased to 1.1% in April, compared with 3.2% in March and 1.3% in April 2025. The decline was mainly driven by lower food inflation, which recorded negative 0.7%, supported by falling core food prices and slower increases in volatile food items.

Monthly non-food inflation remained broadly stable, as higher inflation in services and retail goods partially offset slower growth in regulated prices. The moderation in regulated-price inflation reflected the absence of new price adjustments in April following fuel price hikes implemented in March.

Annual core inflation edged down to 13.8% in April from 14% in March, reflecting lower core food and retail inflation despite a slight increase in services inflation. Monthly core inflation also slowed to 1.1%, compared with 2% in March and 1.2% in April 2025.

Meanwhile, annual rural headline inflation remained largely unchanged at 12% in April, compared with 11.9% in March. Nationwide headline inflation—representing the weighted average of urban and rural inflation—stood at 13.4%, broadly stable from 13.5% in the previous month.

Main drivers of monthly inflation in April

Monthly food inflation registered negative 0.7%, subtracting 0.25 percentage points (p.p.) from headline inflation.

Volatile food prices rose by 2.9%, contributing 0.19 p.p. to monthly inflation, driven by increases in fresh fruit and vegetable prices of 4% and 2.3%, respectively, though both remained below seasonal trends.

Poultry and egg prices recorded notable declines of 14.7% and 2.9%, respectively, marking their first monthly drop since December 2025. The CBE said this likely reflected a reversal of seasonal pressures linked to Ramadan and holiday demand. Together, these categories reduced monthly headline inflation by 0.86 p.p.

Monthly non-food inflation reached 2.1%, contributing 1.3 p.p. to headline inflation, mainly due to higher services and retail prices.

Services inflation increased by 3.3%, adding 0.95 p.p. to monthly inflation, driven by higher rents, Hajj and Umrah travel costs, and increased spending at restaurants and cafés. The CBE noted that the latter may reflect second-round effects from recent fuel and commercial electricity price increases.

Retail inflation rose by 1.8%, contributing 0.25 p.p., supported by higher prices for clothing and footwear, household cleaning products, and personal care items.

Inflation in regulated items increased by 0.6%, contributing 0.14 p.p., following an average 23.8% rise in railway and metro fares.

Monthly core inflation stood at 1.1%, with core food reducing inflation by 0.61 p.p., while services and retail items contributed 1.32 p.p. and 0.36 p.p., respectively.

Main drivers of annual inflation

Despite lower monthly food inflation, annual food inflation accelerated to 6.7% in April, mainly due to base effects. Food prices contributed 2.64 p.p. to annual headline inflation.

Volatile food inflation surged to 26.2%, contributing 1.60 p.p., driven primarily by higher vegetable prices, partly offset by declining fruit prices.

Core food inflation increased by 3.4%, adding 1.04 p.p. to annual inflation, reflecting higher prices for beef, seafood, and dairy products despite declines in poultry and egg prices.

Annual non-food inflation eased to 20.1% in April but remained the largest contributor to overall inflation, accounting for 12.23 p.p. of headline inflation.

Services inflation climbed to 25.6%, contributing 6.95 p.p., driven by rising rents, private transport costs, restaurant spending, Hajj and Umrah travel, healthcare services, and personal care expenses.

Inflation in regulated items reached 15.1%, contributing 3.26 p.p., reflecting higher annual prices for tobacco, LPG, natural gas, petroleum fuels, public transportation, and medical products.

Retail inflation recorded 14.1%, contributing 2.02 p.p., supported by rising prices for clothing, household cleaning products, vehicles, engine oils, and personal care items.

Annual core inflation eased slightly to 13.8% from 14% in March. Services and retail categories remained the main contributors, accounting for 9.62 p.p. and 2.79 p.p., respectively, while core food contributed a modest 1.44 p.p. to annual core inflation.

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Attended by more than 100 local and international media representatives, both in person and virtually, the briefing highlighted preparations for AAM2026, expected participation levels and Egypt’s role as host of one of Africa’s leading annual forums focused on economic transformation and trade development.

In his remarks, Abdalla reaffirmed Egypt’s commitment to ensuring the successful hosting of AAM2026, underscoring the country’s longstanding partnership with Afreximbank in supporting African economic development, trade and investment.

“Egypt is honoured to host the 33rd Afreximbank Annual Meetings in Alamein, reflecting our continued commitment to supporting Africa’s economic integration, trade expansion and sustainable development,” Abdalla said.

He added that the meetings would provide a high-level platform for dialogue and the exchange of views on the future of African economic and financial cooperation.

“The meetings go beyond conventional discussions to advance key continental priorities, including trade finance, regional integration and the urgent need to reform the global financial architecture to better reflect the development needs of emerging economies,” he said.

For his part, Elombi expressed appreciation to Abdalla and Egyptian institutions involved in organising the event, praising their support and coordination efforts.

“Egypt and Afreximbank share a common vision to accelerate Africa’s economic development, industrialisation and broad-based prosperity across the continent,” Elombi said.

“AAM2026 will provide an important opportunity to strengthen partnerships, unlock investment opportunities and advance discussions on intra-African trade, Africa’s financial sovereignty and economic resilience in an increasingly complex global environment.”

Elombi added that Afreximbank’s annual meetings aim to identify priority projects and actionable programmes capable of accelerating the transformation of Africa’s trade infrastructure.

“Africa’s growth trajectory will be driven by industrialisation and intra-African trade, and achieving this will require substantial improvements in processing, logistics and, importantly, supportive government policies,” he said.

The briefing underscored the strategic partnership between Egypt and Afreximbank, while highlighting the bank’s support for sectors including financial services, trade, industrial infrastructure, manufacturing, oil and gas, telecommunications, power and construction.

Officials also outlined the potential economic benefits of Egypt hosting AAM2026, including strengthening the country’s position as a regional financial and business hub, supporting the meetings, incentives, conferences and exhibitions (MICE) industry, creating opportunities for Egyptian businesses and investors, and boosting tourism in Alamein.

Elombi revealed that Afreximbank has provided around $9.5 billion in financing to Egypt over the past three years. He also referred to the groundbreaking ceremony for the Afreximbank African Trade Centre (AATC) in the New Administrative Capital in December 2025, noting that the $250m project is expected to reinforce Egypt’s role as a regional hub for trade facilitation, payments, logistics and SME development.

He further highlighted plans for the proposed pan-African Gold Bank, an initiative intended to formalise Africa’s gold value chains, strengthen central bank reserves and reduce reliance on offshore refining and external trading centres.

Over the years, Afreximbank’s Annual Meetings have evolved into one of the continent’s leading platforms for shaping dialogue on Africa’s economic future and promoting intra-African trade. The 33rd edition is expected to bring together heads of state, government ministers, central bank governors, business leaders, academics, entrepreneurs, investors and development partners to discuss the issues shaping Africa’s economic outlook and trade agenda.

The AAM2026 programme will feature policy discussions, plenary sessions, investment and business forums, deal-signing ceremonies, major announcements, networking events, bilateral meetings and discussions centred on intra-African trade and the African Continental Free Trade Area (AfCFTA). Sessions will also address trade finance, industrialisation, energy, infrastructure and digital transformation.

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The report showed that total foreign assets held by the banking sector—including the CBE and commercial banks—rose to the equivalent of EGP 4.921trn in March, compared with EGP 4.526trn in February. At the same time, foreign liabilities increased to the equivalent of EGP 3.756trn, up from EGP 3.212trn in the previous month.

Net foreign assets are considered a key indicator of the banking sector’s financial strength and resilience, measuring the difference between foreign currency-denominated assets and liabilities.

In a separate development, the CBE revealed that domestic liquidity in the banking sector increased to approximately EGP 15.074trn in March 2026, compared with EGP 14.027trn in December 2025, reflecting growth of EGP 1.046trn during the first quarter of the year.

According to the central bank, money supply rose to EGP 4.189trn in March, up from EGP 3.796trn in December. Currency circulating outside the banking sector also increased to EGP 1.576trn, compared with EGP 1.443trn three months earlier.

The report further showed that total non-government local currency deposits at banks operating in the domestic market climbed to EGP 9.943trn in March, compared with EGP 9.580trn in December, an increase of approximately EGP 363bn.

Demand deposits in local currency rose to EGP 2.612trn, up from EGP 2.352trn in 2025. Of the total, the public business sector accounted for EGP 110.324bn, the private sector for EGP 1.367trn, and households for EGP 1.135trn.

Meanwhile, time deposits and savings certificates denominated in local currency reached around EGP 7.330trn in March, compared with EGP 7.228trn in December. Households represented the largest share at approximately EGP 6.845trn, while the private business sector accounted for EGP 418.180bn and the public business sector for EGP 66.833bn.

The central bank also disclosed a significant increase in non-government foreign currency deposits, which rose to the equivalent of EGP 3.554trn in March 2026, compared with EGP 3.003trn in December 2025, marking an increase equivalent to EGP 551bn.

Foreign currency demand deposits increased to the equivalent of EGP 912.167bn in March, up from EGP 738.9bn in December. The private business sector held the largest share at the equivalent of EGP 608.661bn, followed by households with EGP 253.842bn and the public business sector with EGP 49.798bn.

In addition, time deposits and savings certificates in foreign currency rose to the equivalent of EGP 2.642trn in March, compared with EGP 2.264trn in December. Households accounted for the bulk of these deposits at the equivalent of EGP 1.866trn, while the private business sector held EGP 601.660bn and the public business sector EGP 174.227bn.

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The increase was mainly driven by fresh loan disbursements and exchange-rate movements, although valuation effects reduced the debt stock by approximately $48m.

Long-term debt remains dominant

By original maturity, long-term external debt continued to account for the largest share of Egypt’s obligations, reaching $128.9bn in September 2025, while short-term debt stood at $34.8bn.

Measured by residual maturity, short-term debt totalled approximately $59.4bn during the same period.

Long-term external debt declined by around $1.4bn compared with June 2025. Debt owed to multilateral institutions fell by $0.9bn to $43.9bn.

Meanwhile, Egypt’s outstanding stock of international bonds, notes, and sukuk held by non-residents reached $28.4bn, down by $0.3bn from June. The portfolio included approximately $20.1bn in US dollar-denominated Eurobonds, €3.5bn-equivalent in euro-denominated Eurobonds, $2.4bn in US dollar sukuk, $911.8m in Samurai bonds denominated in Japanese yen, $676m in green bonds, $491.5m-equivalent in Panda bonds denominated in Chinese yuan, and $345.5m in sovereign notes.

Rescheduled bilateral debt declined by $149.5m to $307m, while non-guaranteed private sector debt fell by $113.2m to $2.3bn, including $100m in green bonds and $499m in sustainability bonds.

Buyers’ and suppliers’ credit eased by $53.1m to approximately $19.2bn.

Long-term deposits held by Arab countries at the CBE remained unchanged at $9.3bn, including $5.3bn from Saudi Arabia and $4bn from Kuwait.

Repurchase agreements (repo) stood at approximately $6.7bn, while other bilateral debt rose by $128.6m to $18.8bn.

Short-term external debt increased by $3.9bn to $34.8bn in September 2025, with Arab countries’ deposits at the CBE accounting for around 31.9% of the total, equivalent to $11.1bn.

US dollar remains Egypt’s main borrowing currency

The US dollar continued to dominate Egypt’s external debt composition, accounting for $112.9bn, or 68.9% of total debt, in September 2025.

The euro ranked second at $20.1bn, while other major currencies totalled $30.7bn. These included Special Drawing Rights (SDRs) at $14bn, the Chinese yuan at $5.9bn, and both the Kuwaiti dinar and Japanese yen at $3.7bn each, alongside $3.4bn in other currencies.

IMF remains largest multilateral creditor

Debt owed to multilateral institutions totalled $46.6bn in September 2025. The International Monetary Fund (IMF) alone accounted for 28.6% of these loans, equivalent to $13.3bn.

This included $5.3bn under the Extended Fund Facility (EFF), $3.9bn linked to Egypt’s SDR allocation, $3.3bn under the new EFF arrangement, and $0.8bn under the Stand-By Arrangement (SBA).

Other major multilateral creditors included the International Bank for Reconstruction and Development (IBRD) with $12.4bn, the European Investment Bank (EIB) with $3.6bn, the African Development Bank (AfDB) with $2.5bn, and the Arab Fund for Economic and Social Development (AFESD) with $2.2bn.

Debt owed to Arab countries amounted to $40.3bn, led by Saudi Arabia with $15.4bn, followed by the UAE with $12bn and Kuwait with $6.3bn.

Meanwhile, Egypt owed $19.1bn to six Paris Club members, including the United States ($5.4bn), Russia ($5.3bn), Japan ($2.8bn), France ($2.6bn), Germany ($2bn), and the United Kingdom ($1bn). Debt owed to China stood at $9.7bn.

Government debt declines while banks’ debt rises

By debtor sector, external debt owed by “other sectors” increased by $2.4bn to $22.1bn, representing 13.5% of total external debt, largely reflecting higher short-term trade credits.

Banks’ external debt rose by $1.3bn to $23.5bn, accounting for 14.4% of total debt, driven by increased short-term borrowing.

The Central Bank’s external debt edged down by $40.3m to $37.3bn, representing 22.7% of the total.

Government external debt declined by $1.2bn to $80.8bn, equivalent to 49.4% of total external debt.

Debt servicing pressures ease

External debt service payments declined by $1.5bn year-on-year to $6.4bn during July-September 2025/26.

The decrease reflected a $1.2bn reduction in principal repayments to $4.3bn, alongside a $0.3bn decline in interest payments to $2.1bn.

Debt indicators improve despite rise in short-term obligations

The ratio of external debt to GDP improved to 42.4% in September 2025, compared with 44.2% in June 2025.

Short-term external debt by original maturity rose to 21.2% of total external debt, up from 19.2% in June, reflecting the faster pace of growth in short-term liabilities relative to overall debt.

Its ratio to net international reserves increased to 70.2%, from 63.5%, indicating mounting pressure from near-term obligations despite the improvement in reserve levels.

Short-term debt measured by residual maturity climbed to 36.3% of total external debt, compared with 33.8% previously, while its ratio to reserves rose to 119.9% from 112%.

Meanwhile, external debt relative to exports of goods and services declined to 217.5%, from 223%, suggesting a gradual improvement in Egypt’s foreign-currency earning capacity relative to debt obligations.

The annual debt-service ratio fell to 49.4% in September 2025, compared with 53.6% in June, while the debt-service-to-current-receipts ratio declined to 31.7% from 34.5%, reflecting easing repayment burdens.

Reserves continue to strengthen

Net international reserves (NIR) increased by $0.8bn during July–September 2025/26, compared with a $0.4bn rise during the corresponding period a year earlier, reaching $49.5bn by the end of September 2025.

The reserves level covered 5.8 months of merchandise imports.

The increase was driven by a $2.3bn rise in gold holdings, despite a $1.5bn decline in foreign currency holdings.

According to the CBE, NIR climbed further to $52.6bn in January 2026, covering 6.1 months of merchandise imports.

Banks’ foreign assets improve

Banks’ net foreign assets increased by $4.9bn during July–September 2025/26, compared with a decline of $2.9bn in the same period a year earlier.

Foreign currency deposits at banks rose by 2.1% to $63.6bn in September 2025, while local currency deposits increased by 6.5%.

As a result, foreign currency deposits accounted for 25% of total deposits.

The improvement in banks’ foreign asset position reflects stronger foreign currency liquidity conditions within the banking sector, supported by higher inflows and improved balance-sheet positions.

Net external liabilities widen

Egypt’s net international investment position (IIP) recorded net external liabilities of $298.8bn in September 2025, compared with $293.6bn in June.

Claims on non-residents increased by $6.4bn, or 6.4%, to $106.5bn. This was mainly driven by a $4.3bn increase in other investments to $44.8bn, representing 42.1% of total external assets.

Portfolio investment abroad rose by $1.3bn, or 45.3%, to $4.1bn, representing 3.8% of total assets.

Reserve assets also increased by $0.6bn, or 1.3%, to $47bn, maintaining the largest share of total assets at 44.2%.

Similarly, direct investment abroad rose by $176.6m, or 1.7%, to $10.6bn, accounting for 9.9% of total assets.

On the liabilities side, obligations to non-residents increased by $11.7bn, or 3%, to $405.3bn.

The increase was primarily driven by a $6.5bn rise in portfolio investment in Egypt to $56.8bn, representing 14% of total liabilities.

Other investments expanded by $2.8bn, or 2.1%, to $134.7bn, accounting for 33.2% of liabilities.

Foreign direct investment in Egypt also rose by $2.4bn, or 1.1%, to $213.8bn, representing 52.8% of total liabilities.

Despite the increase in net external liabilities, Egypt’s negative net IIP-to-GDP ratio improved to 77.5% in September 2025, from 80.5% in June, reflecting stronger asset growth relative to GDP.

At the same time, the liabilities-to-GDP ratio declined to 105.1% from 107.9%, while the assets-to-GDP ratio increased to 27.6% from 27.4%.

The assets-to-liabilities ratio also improved to 26.3% in September 2025, compared with 25.4% three months earlier.

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In a recent report, the bank said the total includes $2.078bn in interest payments and $4.363bn in principal repayments.

Egypt’s external debt stood at $163.7bn in September 2025, compared with $161.23bn in June of the same year.

The CBE noted that the external debt-to-GDP ratio declined to around 42.4% at the end of September, compared with 44.2% at the end of June.

In a separate development, the central bank reported that net foreign assets (NFA) of the banking sector increased by EGP 474.4bn during the first half of the 2025/2026 fiscal year, equivalent to a 64% growth rate. It attributed the rise to an increase of EGP 339.2bn in banks’ net foreign assets and EGP 135.2bn at the central bank.

In a related context, foreign investors’ holdings of local treasury bills rose to the equivalent of EGP 2.525trn in January 2026, up from EGP 2.449trn in December 2025.

The bank also said remittances from Egyptians working abroad increased by 28% to around $29.4bn during the first eight months of the 2025/2026 fiscal year, compared with about $23bn in the same period of the previous year.

On a monthly basis, remittances rose by 25.7% in February 2026 to around $3.8bn, compared with about $3bn in February 2025.

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Heba Monir, economist and financial analyst at HC, said: “Egypt’s economy remains resilient amid geopolitical tensions; however, we expect the easing cycle to be delayed. Egypt’s external position showed strength at the start of the year, prior to the outbreak of the US-Israeli war against Iran, with net international reserves exceeding a record $52bn in February and the banking sector’s net foreign asset (NFA) position surpassing $29bn in January.

“However, the war triggered net foreign outflows of around $7.09bn from Egypt’s T-bill secondary market since 19 February, leading to an approximately 11% depreciation of the Egyptian pound against the US dollar to EGP 53.6, reflecting exchange rate flexibility. The conflict also drove a roughly 43% surge in oil prices to $102 per barrel, prompting the government to raise domestic prices of diesel, LPG cylinders, and octane gasoline by an average of around 19%, in order to keep the budget deficit close to its target of 7.3% of GDP, given that the FY2025/26 budget assumptions were based on $75 per barrel and an exchange rate of EGP50/$.

“Accordingly, we have revised our estimate for annual headline inflation in March to 14.3% year-on-year and 2.4% month-on-month, and now expect average inflation of around 14-15% year-on-year in 2026, compared to our previous estimate of 10-11% prior to the conflict. This, in our view, could delay the easing cycle.

“That said, we believe the Egyptian economy is in a stronger position than at the onset of the Russia-Ukraine war in February 2022, which triggered $21bn in net foreign treasury outflows. The external position is now more robust, with an NFA position of $29.5bn as of January 2026 versus $0.62bn in January 2022, alongside a flexible exchange rate and the absence of a parallel foreign exchange market.

“Nevertheless, the overall impact will depend on the duration of the war, as Egypt’s foreign currency sources, including tourism, Suez Canal revenues, and worker remittances, could be affected, particularly remittances from Egyptian expatriates in GCC countries. Our baseline assumption is that the conflict will end before the close of the second quarter of 2026.”

Monir added: “We expect Egypt’s banking sector profitability to benefit from a delayed easing cycle and a lower RRR. The Monetary Policy Committee (MPC) of the Central Bank of Egypt (CBE) began the year with a 100 basis point rate cut, bringing total policy rate reductions to 825 basis points since the beginning of 2025, compared to cumulative hikes of 1,900 basis points since the tightening cycle began in 2022.

“The CBE also reduced the required reserve ratio by 200 basis points to 16% on 12 February to stimulate liquidity and lending activity. Supported by resilient banking fundamentals, total sector assets grew by approximately 24% year-on-year to EGP 24trn as of June 2025, representing around 132% of GDP in FY2024/25, and we expect this growth trend to continue.

“Following the outbreak of the war, we have revised our inflation outlook and expectations for further rate cuts in 2026 to around 200 basis points at best, contingent on a resolution of the conflict by the second quarter of 2026. Over the past 12 months, large banks have reduced interest rates on three-year certificates of deposit to 16-17%, down from above 20% following the March 2024 devaluation. We still consider these levels attractive, implying a positive real interest rate of 4-5%.

“Accordingly, we forecast customer deposits to grow by approximately 12% year-on-year to EGP 17.9trn by December 2026, compared to an estimated 17% growth by December 2025. Over the past five years, private sector loans as a share of total market loans declined to around 43% in June 2025 from 62% in June 2020, amid successive global and domestic economic challenges.

“In the near term, we do not expect this ratio to recover before the second quarter of 2027, as the conflict is delaying monetary easing. In 2025, working capital loans recorded healthy growth, which we expect to continue into 2026, supported in part by the approximately 11% depreciation of the Egyptian pound year-to-date.

“We therefore expect total sector loans to increase by around 17% year-on-year to EGP11.6trn by December 2026, compared to an estimated 19% growth by December 2025. We also forecast the loans-to-deposits ratio to rise to approximately 65% in December 2026, up from 62% in June 2025.

“As for profitability, we expect the sector’s average net interest margin (NIM) to decline slightly to 5.5% from 5.8% in June 2025, reflecting relatively lower year-on-year treasury yields despite their recent post-war increase. Similarly, we expect average return on assets (ROA) and return on equity (ROE) to ease to 2.2% and 33%, respectively, from 2.6% and 39% in June 2025.

“Regarding asset quality, we believe banks remain well provisioned; however, we anticipate a 100-200 basis point decline in the capital adequacy ratio (CAR), mainly due to the depreciation of the Egyptian pound.”

The post Slower monetary easing to support banks’ profitability: HC first appeared on Dailynewsegypt.

The reality, from both a scientific and banking perspective, is entirely different and is governed by a “precise rule or balance” established by the supervisory authority, namely the Central Bank of Egypt (CBE). The rule states that loans are attributed to “equity”, not to deposits.

More importantly, it should be understood that a bank’s capacity to lend to a single client is not measured by the volume of deposits it holds, but by its capital base (equity).

Maximum credit exposure

The CBE sets strict limits preventing banks from granting a single client, or related parties, credit exceeding 15% to 25% of the bank’s capital base.

Why? To ensure that risk is not concentrated in the hands of a single client, regardless of size.

Banks also operate in accordance with international standards, specifically the Basel Accords, which impose what is known as the Capital Adequacy Ratio (CAR). This ratio requires banks to maintain a sufficient level of high-quality capital to absorb potential risks in their assets, particularly loans.

In simpler terms, a bank does not lend unless it has sufficient “buffers” from its own funds, namely capital and retained earnings, to cover these risks, independently of depositors’ money.

Syndicated loans: distributing risk

When a loan is exceptionally large, banks resort to what is known as a syndicated loan, where professional expertise is clearly demonstrated. No single bank bears the risk alone; instead, the loan is distributed among a group of banks, meaning the risk is shared. Each bank participates with a share proportionate to its limits and capital base.

This approach represents a form of “collective insurance” that protects the banking system from individual shocks. But how does a bank ensure repayment? The lending process is not merely about signing contracts; it goes through several complex stages.

First, there are feasibility studies and cash flow assessments. Banks do not rely solely on tangible collateral, but on the project’s ability to generate sufficient income to service the loan.

Then there is the provisioning system. At the first sign of potential default, banks are required, under central bank regulations, to build provisions from their profits to address the risk. This means that the bank’s profits are affected first, while deposits remain fully secure and protected by regulatory safeguards.

Depositors’ funds are not the sole driver or benchmark for granting large loans; rather, lending decisions are based on the bank’s financial strength, capital base, and compliance with strict central bank regulations.

The Egyptian banking system applies some of the most up-to-date supervisory standards globally, ensuring that any default is managed through professional technical mechanisms, such as restructuring, provisioning, and collateral, without affecting the safety of individuals’ savings.

Mohamed Abdel Aal – Banking expert

The post Opinion | How are large loans granted? first appeared on Dailynewsegypt.

The offering includes a fixed-rate certificate with an annual return of 17.5%, disbursed monthly, providing a predictable income stream insulated from interest rate fluctuations. The minimum subscription is set at EGP 50,000.

CIB has also launched a daily variable-rate certificate with an annual return of up to 19.25%, linked to the corridor rate set by the Central Bank of Egypt (CBE), at a margin of 0.25% above it. Returns are paid on a daily basis, allowing immediate access to accrued earnings. The minimum subscription for this product is EGP 1,000.

In addition, the bank introduced a monthly variable certificate offering an annual return of 19.5%, currently among the highest for variable instruments, priced at a margin of 0.50% above the corridor rate. Returns are paid monthly, enabling customers to benefit from potential upward movements in interest rates. The minimum subscription is EGP 1,000.

CIB noted that the certificates provide flexible redemption options. Variable-rate certificates may be redeemed after six months, with early redemption fees starting at 2.5% in the first year, declining to 2% in the second year and 1% in the third.

The post CIB launches three-year certificates with competitive fixed, variable returns first appeared on Dailynewsegypt.