Egypt's foreign reserves have never been higher. Nor has the tension been clearer between its stronger external buffer and the central bank's rising exposure to a government the IMF wants to rely less heavily on domestic financial institutions for financing.

Net international reserves reached $56.29bn at the end of July, up $1.22bn on June's $55.07bn and above $56bn for the first time. Net foreign assets at the Central Bank of Egypt (CBE) rose to $17.76bn from $16.97bn, a gain of $785mn, or 4.62%, on the CBE's own conversion rates of EGP51.1934 to the dollar in July and EGP49.2763 in June.

The same monthly statement shows the other side of the ledger. Net domestic assets fell 14.12% to EGP1.645tn ($32.8bn) from EGP1.916tn ($38.2bn). Yet within that shrinking total, net claims on the government climbed 7.77% to EGP2.092tn ($41.7bn) - an increase of EGP150.8bn ($3.0bn) in a single month - and net claims on banks rose 19.96% to EGP455.58bn ($9.07bn), up EGP75.8bn ($1.51bn).

Egypt has spent two years being pressed by its creditors to reduce the sovereign-bank nexus and lessen the state's dependence on domestic financial institutions for financing. The IMF has described that nexus as one of the strongest in the world and has estimated domestic government debt holdings at around half of bank assets. July's numbers suggest the same relationship is also visible on the central bank's own balance sheet, in the month the Monetary Policy Committee was preparing to meet again.

A record built on official financing

The record was heavily supported by official external financing rather than being solely the product of underlying trade or investment flows.

On July 29 the European Union disbursed €1.5bn ($1.74bn) to Egypt under its macro-financial assistance programme, the second instalment of a €4bn operation adopted in June 2025 and the third payment since December 2024. It takes the form of concessional loans, released against reform conditions and progress under the IMF programme. On its own, that tranche was worth more than the entire month's rise in reserves.

Gold did much of the remainder. The metal component of the reserves rose to about $17.1bn from $16.7bn as prices climbed through late July, accounting for about 29% of the month's increase and reflecting mainly valuation gains rather than fresh inflows, Al Manassa reported on August 5. Foreign currency holdings made up most of the rest.

Beneath the headline, the external accounts are still under strain. Egypt's balance of payments deficit narrowed to $1.8bn in the first nine months of FY2025/26, but only because a $9.9bn capital and financial account surplus offset a $14.6bn current account deficit. Portfolio investors pulled a net $4.4bn over those nine months, including a $9.5bn exit in January-March as regional conflict soured appetite for emerging markets. Remittances at $34.9bn, up 32%, tourism at $14.4bn and Suez Canal receipts of $3.2bn helped offset pressure elsewhere in the external accounts.

The pound has felt it. It weakened past EGP50 to the dollar in mid-July on the same hot-money exit, its third consecutive daily loss at the time, before recovering to around EGP50.2 by mid-August. Local analysts expect it to hold between EGP49 and EGP51 rather than retest the EGP55 low.

The state moves up a floor

The domestic side of the July statement is the part that matters for the banks.

An EGP150.8bn ($3.0bn) monthly increase in the central bank's net claims on the government is large in any system. It is larger still against a June total of EGP1.941tn ($38.7bn). Net claims on banks rising a fifth in the same month points to the CBE putting liquidity into the sector as well as into the treasury.

The reported components do not by themselves explain the decline in net domestic assets. NDA fell EGP270.5bn ($5.39bn) during the month even as net claims on government and banks rose by a combined EGP226.6bn ($4.51bn), implying a large offsetting movement elsewhere on the CBE balance sheet. The abbreviated monthly release does not identify that movement.

The commercial banks are moving the other way on external assets. The banking system's net foreign assets jumped 22% m/m to $27.9bn in June, a $5bn expansion in one month, on the sector's foreign-currency liquidity. That figure is a system-wide measure and is not the same as the CBE's own $17.76bn; the two are frequently conflated.

Rates on hold, again

The MPC meets on August 20 and is widely expected to leave the overnight deposit rate at 19%, the lending rate at 20% and the main operation rate at 19.5%, where they have remained through several meetings this year.

Mohamed Abu Basha, head of macroeconomic analysis at EFG Hermes, sees limited scope for easing despite July's inflation reading. Sara Saada, senior macroeconomist at CI Capital, and Hany Genena, head of research at Ahly Pharos, both expect a hold, Genena noting that restrictions on personal lending have reduced the need to use rates to curb credit growth. Urban inflation was 14.9% in July.

Those yields help sustain the carry trade. At an auction on August 10 the CBE, acting for the finance ministry, rejected every bid for a two-year bond and took EGP15.41bn ($307mn) of three-year paper at a weighted average 23.354%, having seen requested yields as high as 35%. Against 14.9% inflation that is a spread of about 8.5 percentage points, with sovereign exposure carrying materially different risk characteristics from private lending.

The banks below

The sector's results reflect the arrangement rather than any lending boom. Commercial International Bank (EGX: COMI), the largest private-sector lender, posted first-quarter net profit of EGP17.8bn ($354mn), up 7% y/y, on revenue up 15%. Its loan book reached EGP643bn ($12.8bn) and deposits EGP1.21tn ($24.1bn), but stripping out the pound's depreciation left real loan growth at 8% and real deposit growth at 4%. Asset quality is not the problem: non-performing loans stood at 1.70%, covered 344%.

The system is dominated by state-owned National Bank of Egypt and Banque Misr, alongside large private and foreign-owned lenders including Commercial International Bank (EGX: COMI), QNB Egypt (EGX: QNBA) and Credit Agricole Egypt (EGX: CIEB).

Selling any of them remains difficult. The Banque du Caire listing was pushed back again in June, to the end of 2026, on regional instability and thin summer markets. It is one of several delays over two decades for a privatisation that forms part of the broader state-asset reform agenda backed by the IMF, with EFG Holding and CI Capital appointed as joint bookrunners and the deal still waiting on a market calm enough to price it.

Egypt has assembled the largest external buffer in its history and it is real money that will pay real bills. It has also just added EGP150.8bn to what the central bank is owed by the state, in a month when Brussels supplied more foreign exchange than the reserves gained. The position is easier to manage while concessional external financing continues to arrive, but it leaves the quality and durability of reserve accumulation dependent in part on continued reform-linked official inflows.