Egypt’s Oil Bill Is the Risk, Not the Main Driver: Non-Oil Trade Accounts for 71 Percent of the Deficit Widening
Egypt’s merchandise trade deficit widened by $9.5 billion in the first nine months of the 2025/2026 fiscal year, and roughly seven-tenths of that came from goods that have nothing to do with energy.
The Central Bank of Egypt’s balance of payments release for July to March shows the merchandise trade deficit rising 24.6 percent to $47.8 billion. Within it, the non-oil deficit widened by $6.7 billion, or 23.8 percent, to $34.7 billion, while the oil trade deficit widened by $2.8 billion, or 26.8 percent, to $13.1 billion. Non-oil trade therefore accounts for approximately 71 percent of the widening, and oil for approximately 29 percent. In level terms the oil deficit is $13.1 billion of a $47.8 billion total, about 27 percent.
That runs against the framing invited by the forecasts now circulating. Morgan Stanley expects Egypt’s energy trade deficit to remain one of the largest pressures on the current account in the year to June 2027, putting it between $18 billion and $23 billion depending on oil prices and regional tensions, Bloomberg reported on 15 August. Its optimistic case, assuming oil retreats and the Strait of Hormuz reopens, gives about $18 billion; its base case about $20 billion; its stress case about $23 billion, with the current account deficit reaching $17 billion.
Set against Egypt’s own outturn, those scenarios are less dramatic than they read. The nine-month oil deficit of $13.1 billion annualises mechanically to approximately $17.5 billion. Morgan Stanley’s optimistic case sits about 3 percent above that run rate, its base case about 15 percent above, and its stress case about 32 percent above. This is a scale comparison rather than a forecast — the run rate takes no view on prices and the bank’s scenarios cover a different fiscal year — but it frames the debate honestly. The good outcome is roughly where Egypt already is. The bad one is a third worse.
The energy story is a gas story
Decomposing the oil account further isolates the pressure with unusual precision.
Oil imports rose $2.8 billion, or 19.5 percent, to $17.3 billion. Within that, natural gas imports increased $2.6 billion and crude oil imports $831.1 million, while imports of oil products fell $603.2 million on lower quantities. Natural gas alone therefore accounts for roughly 93 percent of the increase in Egypt’s oil import bill, and about 27 percent of the entire widening in the merchandise trade deficit.
The export side barely moved. Oil exports edged up just $55.0 million to $4.2 billion, as higher natural gas and oil product shipments were nearly cancelled by a $330.2 million decline in crude exports. Egypt’s energy deterioration is almost entirely an import-side, gas-specific event.
That matters for how the forward risk should be read. The International Monetary Fund, in its seventh review published 13 August, reports that the import bill expanded by approximately $3.5 billion between March and June, with natural gas accounting for roughly half of the increase, after a suspension of pipeline gas deliveries in March forced costly liquefied natural gas purchases. Deliveries resumed in April under long term contracts. The nine-month data closes in March; the sharpest part of the gas shock lands after it.
The larger drain is not oil at all
The most consequential number in the release is not in the trade account.
Egypt’s investment income deficit widened 18.2 percent to $14.4 billion, from $12.2 billion, as investment income payments rose $2.3 billion to $16.4 billion against receipts of approximately $2 billion. That deficit is larger than the entire oil trade deficit of $13.1 billion.
Egypt now pays more to service foreign capital than it pays, net, for energy. The oil price is the volatile line and the one that generates forecasts; the income account is the standing cost, and it moves with global interest rates and the stock of external liabilities rather than with the barrel.
What holds the account together
The current account deficit came in at $14.6 billion despite a $47.8 billion goods deficit, because two non-goods flows do almost all of the offsetting work.
Net unrequited current transfers rose 31.1 percent to $34.7 billion, mainly on remittances from Egyptians working abroad, and the services surplus rose 19.2 percent to $12.9 billion on tourism receipts and recovering Suez Canal transit. Together those came to $47.6 billion, equivalent to 99.6 percent of the merchandise trade deficit. Transfers alone rose approximately $8.2 billion year on year, absorbing about 87 percent of the $9.5 billion deterioration in goods trade.
The Fund estimates remittance inflows at close to 10 percent of GDP in FY2024/25, with roughly 74 percent originating from Gulf Cooperation Council countries. That concentration should not be read as a natural hedge. Remittances are Egypt’s most powerful external buffer, but sourcing three quarters of them from a single bloc means the buffer and the risk share a region.
Elsewhere the account held. The overall balance of payments deficit improved to $1.8 billion. The capital and financial account recorded net inflows of $9.9 billion, with net foreign direct investment of $13.0 billion, though portfolio investment recorded a net outflow of $4.4 billion across the nine months, including a $9.5 billion net outflow in the January to March quarter. Gross international reserves stood at $64 billion at end-January and reached 119 percent of the Fund’s reserve adequacy metric by end-June.
The oil sensitivity, and its limits
The Fund states that a $10 per barrel increase in international oil prices widens the current account deficit by about 0.3 percent of gross domestic product annually, estimates the deficit at 4.5 percent of GDP in FY2025/26, and notes Egypt’s budget assumes around $75 a barrel. On a FY2025/26 GDP of about $407 billion — implied within 0.4 percent by two independent central bank ratios — that sensitivity is worth roughly $1.2 billion a year per $10. It is a FY2025/26 figure and should not be carried into Morgan Stanley’s FY2027 scenarios, which rest on a larger nominal GDP the Fund does not publish in dollars.
Brent averaged $117.29 in April 2026, according to the U.S. Energy Information Administration, before easing to average $83.76 in July — $8.76 above the budget assumption.
The Fund also models a downside, but it is not an oil case and should not be quoted as one. It assumes oil at $103 alongside the Strait of Hormuz reopening, Suez Canal traffic unchanged at current levels, tourism receipts 5 percent below baseline, a reduction in portfolio inflows equivalent to about half that experienced in the second half of FY2025/26, and a 150 basis point increase in spreads. The resulting 0.6 percentage point widening is the combined effect of all six.
What to watch
Three questions follow from the nine-month data. Whether oil’s roughly 29 percent share of the trade deterioration rises toward the weight the forward scenarios imply, once the post-March gas shock enters the numbers. Whether transfers can keep absorbing close to 90 percent of a widening goods gap. And whether the investment income deficit, now the single largest drain on the current account and already above the oil bill, keeps growing at 18 percent a year.
Sources
Central Bank of Egypt, Press Release: Balance of Payments Performance During July/March of FY 2025/2026 · International Monetary Fund, Country Report No. 26/224, August 2026, and Press Release 26/271 · Bloomberg, 15 August 2026 · U.S. Energy Information Administration, Europe Brent Spot Price FOB monthly series. Calculations by The Edge Research Team.
