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.