Researchers and policy makers in the last decades mentioned the importance of balanced budget and the role of the foreign direct investment (FDI) for the performance of the domestic economy. Additionally, they mentioned that FDI can also solve some economic problems such as; lack of domestic investment, decrease the fiscal deficit balance, and unemployment. However, the majority of the previous literature have focused on analyzing this relationship in one directional with the majority analyzing the impact of the budget deficit on the FDI while, fewer studies analyzed the impact of FDI on the budget deficit. By surveying a sample of these studies, it has been observed that the relationship between budget deficit and FDI is with non- monotone nature where the impact might be negative or positive.

By considering the case of Egypt, it suffered from debt crises and budget deficits because of the pressure of internal or external shocks, and the negative effect of political, economic, and social instability conditions. Moreover, it enjoys competitive advantages in attracting foreign investment as this is owing to the reforms that adopted by Egypt through a large scale of national strategy. Additionally, it has implemented some regulatory reforms, it seems that all these economic reforms that started since the implementation of the open-door policy in 1970s until the recent reforms that started in 2016, it still being followed up to improve and help Egypt's investment and business climate.