Remittances Shield Cairo from FX Volatility

Egypt’s external position is being quietly rebuilt through an unrelenting surge of diaspora remittances, which neared US $27 billion in the first eight months of 2025. The flow—second only to hydrocarbon exports across MENA—has become Egypt’s most reliable source of hard currency as the pound struggles under import-driven pressure. Average monthly receipts of US $3.3 billion have narrowed the current-account deficit to 3.1 % of GDP and stabilised reserves near US $42 billion.

With Brent (CL=F) holding above US $81 and the dollar index (DXY) staying firm, Egyptians working in Gulf economies benefit from rising real incomes and digital transfer channels that cut informal leakages. The Central Bank’s remittance platform, offering fee rebates and instant clearing through licensed fintechs, has redirected flows from parallel FX markets to banks. Interbank rates have eased 35 bps since August, and T-bill demand from local banks has tightened yields around 25 %.

Remittances now rival Suez Canal revenue and tourism combined, underscoring structural dependence on diaspora capital. The monetary transmission is clear: FX liquidity buffers contain import inflation and delay further policy tightening. However, fragility remains if oil prices retreat or Gulf tax reforms reduce expatriate earnings. Debt-service outflows above US $30 billion a year still consume nearly half of hard-currency receipts.

If CPI continues its slow descent—from 30 % in April to 26 % by September—real rates could turn positive by mid-2026, supporting EGP stability around 49–51 per USD. A sustained remittance trajectory above US $38 billion would anchor the external account and allow gradual re-opening of the capital market to foreign investors by Q4 2026.