Egypt’s Record Reserves Boost Financial Stability During Reforms
Egypt’s foreign currency reserves have reached a record high. This is helping the country improve financial stability, support its currency, and manage economic risks. The rise in reserves shows that Egypt is moving away from crisis management and toward long-term economic reform.
By the end of January 2026, Egypt’s reserves increased by 9.4% compared to last year, reaching $52.6 billion. This steady growth has been supported by international financial aid, higher money transfers from Egyptians working abroad, and a strong increase in gold holdings.
The increase in reserves started in March 2024. Since then, the government and the Central Bank of Egypt (CBE) have introduced monetary reforms. One major step was raising interest rates by 16% to fight inflation. The government also launched policies to support private sector growth.
According to Vijay Valecha, CIO at Century Financial, Egypt’s reserves include gold and major currencies such as the US dollar, euro, British pound, Japanese yen, and Chinese yuan. These reserves help the country pay for important imports, repay foreign debt, and protect the economy during difficult times.
A large part of the recent increase in reserves came from higher gold prices. Analysts from BMI, a partner of Fitch Solutions, said that about 71.8% of the rise in net reserves since February 2024 came from gold revaluation. This means that as global gold prices increased, the value of Egypt’s gold holdings also grew. Around 27.6% of the reserve growth came from higher foreign currency holdings.
From Currency Crisis to Reform
In early 2024, Egypt faced a serious shortage of foreign currency. The Egyptian pound lost value quickly, and economic pressures increased. Investors became worried, and trade was affected. In response, the central bank took urgent steps to stabilize the economy.
Egypt has long faced structural challenges. The country imports large amounts of food and energy but does not export enough to match those costs. This creates constant demand for foreign currency and leads to a trade deficit.
The situation became worse after the Russia-Ukraine War began in 2022. Egypt depends heavily on wheat imports from Russia and Ukraine and also benefits from tourists from those countries. Due to these pressures, reserves fell from $40.99 billion in February 2022 to $37.08 billion in March 2022.
To strengthen its financial position, Egypt secured major international agreements. In February 2025, it signed a $35 billion deal with ADQ from Abu Dhabi to develop the Ras El-Hekma area. Soon after, Egypt received an $8 billion support package from the International Monetary Fund (IMF) to support fiscal and economic reforms.
These IMF-supported reforms aim to increase private sector involvement, reduce the role of state-owned companies, improve public financial management, and attract foreign investment. Financial support from Gulf countries, the IMF, and the World Bank has also helped rebuild reserves.
A strong reserve position increases confidence in Egypt’s exchange rate system. It lowers the risk of a sudden currency crash and supports steady foreign investment in Egypt’s debt market.
Why Foreign Reserves Are Important
Economists believe that rising reserves show better crisis management and stronger economic planning. High reserves allow Egypt to meet short- and medium-term financial obligations, protect the currency, and manage global economic shocks.
Large reserves help Egypt pay for important imports like wheat and fuel without strict currency controls. This reduces the impact of global price increases on local consumers.
According to BMI analysts, the recovery in reserves and improvements in banks’ foreign asset positions have increased foreign currency liquidity. This allowed authorities to remove import restrictions introduced between 2022 and 2024. At that time, Egypt required letters of credit and cash cover to save foreign currency.
Egypt’s reserves are diversified across different currencies, including the US dollar, euro, British pound, Japanese yen, and Chinese yuan. This helps reduce currency risk and provides flexibility if exchange rates change. Gold reserves alone increased by nearly $2.6 billion in one month, reaching $20.73 billion at the end of January 2026.
A stable Egyptian pound also helps control inflation, especially in a country that depends heavily on imports. It reduces the difference between official exchange rates and black-market rates.
Egypt’s reserves have now increased for more than 40 months in a row. This growth is supported by tourism, manufacturing, exports, information and communication technology (ICT), and remittances — not just short-term investments.
When the pound faces pressure, the central bank can use reserves to support it. This helps prevent sharp devaluation and reassures international investors. As confidence grows, foreign direct investment (FDI) and capital inflows also increase, which further supports the currency.
Trade Deficit and Debt Challenges
Egypt’s trade data shows why reserves are so important. In 2024, total imports reached $95 billion. Of this, $17 billion was energy and $7 billion was cereals, mainly wheat. Egypt has had a trade deficit since 2004, meaning it imports more than it exports.
As a net importer, Egypt benefits from having strong reserves. A higher level of foreign currency supports a stronger pound and ensures that essential goods can be imported without disruption.
However, external debt remains a major challenge. By September 2025, Egypt’s external debt had risen to about $163.7 billion. A large portion of government revenue is used to service this debt. This reduces available funds for infrastructure, healthcare, and education.
Growth Outlook Improves
Despite these challenges, Egypt’s economic outlook is improving. Inflation is slowly decreasing, reforms are progressing, and the exchange rate system has been unified.
The government expects economic growth to reach 5.2% in the 2025–26 fiscal year, higher than previous estimates. The IMF has raised its growth forecast to 4.7% for 2025–26 and 5.4% for 2026–27. The World Bank projects growth of 4.3% in 2025–26 and 4.8% in 2026–27.
Tourism is recovering due to improved security and global travel demand. This brings in foreign currency and creates jobs. Manufacturing is also improving as access to foreign currency becomes easier. Financial services and telecommunications are expanding, supported by Egypt’s young and growing population.
Inflation is also falling. Core inflation dropped to 11.2% in January 2026, compared to 12.5% in November. If global commodity prices stay stable and dollar inflows continue, inflation may average between 8% and 10% this year.
The Central Bank of Egypt recently cut interest rates by 100 basis points to 19%. If inflation continues to decline, further rate cuts may follow.
However, experts warn that deeper problems remain. Egypt still depends heavily on imports, and inflation remains relatively high. High prices continue to affect household purchasing power and consumer demand.
Risks and the Road Ahead
Egypt has made progress in restoring macroeconomic stability. In fiscal year 2025, the government recorded a primary budget surplus of 3.5% of GDP. Improved financial management and IMF-backed reforms have reduced some external pressures.
However, reliance on short-term foreign investment remains a risk. If global investor confidence changes suddenly — for example, due to geopolitical tensions or financial market corrections — foreign money could leave quickly. This would put pressure on the exchange rate and inflation.
Foreign investors held about $24.1 billion in Egyptian local-currency debt as of September 2025, equal to about 45.8% of CBE reserves at the end of January 2026. This shows that reserve strength partly depends on investor confidence.
The government is trying to reduce long-term risks by encouraging local manufacturing, increasing exports, attracting foreign investment, and lowering energy import costs. However, building strong domestic supply chains will take time.
Conclusion
Egypt’s record foreign currency reserves provide a strong financial cushion. They have improved confidence, stabilized the currency, and supported economic reforms. But reserves alone cannot solve deep structural challenges such as high debt, trade deficits, and import dependence.
To ensure lasting growth, Egypt must continue reforming its economy, support private businesses, expand exports, and improve governance.
The country has built a stronger financial foundation. The next challenge is turning that stability into sustainable and broad-based economic growth.
Published: 27th February 2026
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