Ahmed Kamel – Egypt Daily News
Egypt’s government debt instruments are expected to remain the primary destination for foreign investors in 2026, as high real yields on the pound and easing global dollar interest rates continue to underpin appetite for local fixed-income assets, according to a range of economists and market analysts.
Data from the Central Bank of Egypt show that sales of domestic debt instruments surged by about 73 percent in 2025, exceeding 9.5 trillion pounds, compared with roughly 5.5 trillion pounds in 2024. The sharp increase was driven by strong inflows from foreign investors alongside expanding government financing needs, reinforcing the central role of treasury bills and bonds in Egypt’s capital markets.
Analysts say the slowdown in inflation has been a key factor enhancing the real return on pound-denominated assets. With inflation pressures easing, Egypt’s real interest rate is estimated at around 7.5 percent, one of the highest among emerging markets. This has helped offset the impact of recent interest rate cuts by the Central Bank of Egypt, which reduced policy rates by a cumulative 7.25 percentage points over five meetings last year.
Sahar El-Damaty, former deputy chair of Banque Misr, said foreign inflows into government debt are likely to continue in the year ahead, supported by the combination of attractive real yields and declining US interest rates. She noted that lower perceived risks in Egyptian treasury bills and bonds have encouraged foreign investors to maintain exposure, despite the monetary easing cycle.
El-Damaty added that the Ministry of Finance’s ongoing need to finance the budget deficit is another factor sustaining large-scale debt issuance, ensuring a steady supply of instruments for foreign participation. Treasury bills and bonds remain the government’s main tools for raising liquidity from banks, institutions and investors to cover financing gaps.
Mohamed Abdel Aal, a banking expert, said record foreign inflows and the widening budget deficit were among the main drivers behind last year’s unprecedented issuance volumes. He cautioned, however, that the sustainability of demand will depend on the government’s ability to diversify revenue sources beyond borrowing, as well as on regional and global geopolitical developments that could influence investor risk appetite.
Central bank figures show that foreign investments in treasury bills alone rose by about $10.7 billion in the first seven months of 2025, reaching a record $42.4 billion by the end of July. Foreign purchases through the secondary market totaled around $9.2 billion by November, down from roughly $14 billion over the same period in 2024, indicating some moderation in activity toward the end of the year.
Currency stability has also played a supportive role. Mahmoud Negla, executive director of money markets and fixed income at Al Ahly Financial Investments, said foreign inflows are likely to persist in 2026, albeit at a slower pace after reaching record levels. He argued that expectations of exchange rate stability, combined with continued positive real yields, should help retain existing foreign investments while attracting selective new flows.
The Egyptian pound strengthened notably in the second half of 2025, buoyed by strong foreign currency inflows and improved tourism revenues. Central bank data show the pound appreciated by about 6 percent against the US dollar over the year, ending 2025 at an average rate of around 47.6 pounds per dollar.
While debt instruments dominate foreign investment strategies, some analysts see scope for a gradual return of foreign investors to the equity market in 2026. Hany Genena, head of research at Al Ahly Pharos, expects renewed interest particularly in the second half of the year, citing growing inquiries from foreign institutions about market conditions and opportunities.
Genena said initial inflows are likely to focus on highly liquid stocks, which are better suited to institutional investment strategies, with the financial sector expected to remain a key area of attraction. He also noted that Egyptian bonds could draw increased foreign interest over the medium term, as expectations of further interest rate cuts raise the potential for capital gains in addition to high yields.
The revival of the government’s privatization and listing program was highlighted as a critical factor for attracting more sustainable foreign equity investment, particularly from sovereign wealth funds that favor dividend-paying stocks over pure growth plays.
Amr Alfi, head of research at Thndr, echoed the view that treasury bills will continue to top foreign investors’ preferences, especially with the pound showing signs of recovery. He added that a stronger foreign presence in equities will likely depend on new company listings and the expansion of available instruments, including the long-anticipated introduction of derivatives in the Egyptian stock exchange.
Despite improved macroeconomic indicators, foreign investors remained net sellers in the equity market during most of 2025, posting net sales of about 16 billion pounds in the first eleven months of the year, compared with net sales of 7.6 billion pounds in 2024. The contrast underscores the prevailing preference for fixed income over equities as Egypt enters 2026, even as optimism about the broader economic outlook gradually builds.
