Balance of payments deficit hits US$1 billion in first half of the fiscal year

Egypt ran an overall balance of payments deficit of US$1 billion for the first half of the 2014/15 fiscal year, compared to a surplus of around $2 billion in the same period the year before. 

 

The Central Bank of Egypt attributes the deficit to $3 billion in repayments of bonds and deposits. In November, the government repaid $2.5 in Central Bank deposits made by Qatar.

 

Thus, the ministry argues, the widening deficit is a reflection of “the commitment and ability of the Egyptian economy to honor its external obligations on a timely basis.”

 

Meanwhile, the figures reveal a widening trade deficit, a net outflow of portfolio investment and a fall in grants to the government, which could not be counterbalanced by rising tourism revenue and a small increase in foreign direct investment.

 

The numbers, which span July-December 2014, came during a period when half-year GDP growth was recorded at 5.6 percent, but ahead of major financial commitments made at the Egypt Economic Development Conference in March.

 

Egypt’s current account deficit — which marks the gap between the flow of goods, services and cash transfers into versus out of the country — widened to $4.3 billion. At the same time last year, the current account deficit stood at $866 million.

 

The current account deficit was driven by a 33.6 percent increase in the trade deficit, which exceeded $20 billion, mostly driven by merchandise imports. From July-December, Egypt imported more than $32.4 billion worth of goods, while exporting around $12.2 billion worth.

 

The services balance achieved a surplus of some $3.9 billion, compared to a deficit of $463.9 million at the same time the previous year. Tourism revenue played a key role in the shift, more than doubling to reach $4 billion.

 

Net transfers retreated by 18.4 percent to reach around $12 billion, compared to almost $14.7 billion last year. The decline was driven by a decline in cash and commodity transfers to the government, which amounted to $2.6 billion compared to $6.2 billion in the same period the year before. Meanwhile, worker remittances rose to $9.4 billion, up from $8.5 billion.

 

The capital and financial account remained in the black with net inflows of $883.8 million. However, this was far below the $3.2 billion recorded the year before.

 

Repayments of bonds and Central Bank deposits led to net outflows for both portfolio investment and Central Bank Liabilities. A slight bump in Foreign Direct Investment, which rose from around $2.07 billion to reach $2.73 billion was not enough to outweigh the overall outflow of funds.

AD

You have a right to access accurate information, be stimulated by innovative and nuanced reporting, and be moved by compelling storytelling.

Subscribe now to become part of the growing community of members who help us maintain our editorial independence.
Know more

Join us

Your support is the only way to ensure independent,
progressive journalism
survives.