Egypt’s balance of payments deficit rose to US$3.4 billion in the first half of the 2015/16 financial year, up from US$1 billion during the same period the year before.
Cash inflows from tourism, exports, worker remittances, foreign aid and the Suez Canal all fell during the period. This was only partially offset by increases in foreign direct investment and a lower import bill, Central Bank of Egypt figures show.
The increase in the overall balance of payment deficit was driven by a jump in the current account deficit, which reached US$8.9 billion, compared to US$4.3 billion a year earlier.
Egypt’s trade deficit narrowed slightly to US$19.5 billion, down from US$20.4 billion in the same period the year before. Although the government has recently launched efforts to narrow the trade deficit by discouraging imports of non-essential goods, most of the decline recorded appears to be due to lower global prices for oil and other commodities. Imports during the period dropped to US$28.6 billion, compared to US$32.7 billion a year earlier. Most of the drop was due to a drop in the petroleum import bill, which fell from US$7 billion to US$5.4 billion.
Cash and commodity transfers to the government plummeted to just US$32 million compared to US$2.6 billion a year earlier, while private transfers — mostly remittances from workers abroad — edged down to US$8.3 billion, compared to US$9.4 billion last year. Tourism revenues fell by almost a third to reach just US$2.7 billion, while income from the Suez Canal dropped from US$2.9 billion to US$2.6 billion.
The capital and financial account — which includes money invested by foreigners in Egypt as well as money Egypt borrows from abroad — recorded a net inflow of US$9.2 billion, compared to US$772 million a year earlier. Foreign direct investment rose slightly from US$2.6 billion to US$3.1 billion. Meanwhile, net borrowing increased from US$2.1 billion to US$3.5 billion.
Short-term supplier credits jumped to US$4 billion, compared to US$2.2 billion in the same period a year earlier. Paired with a drop in imports, the increase in this figure suggests that Egypt is becoming increasingly reliant on credit from companies supplying imported goods. However, the Central Bank put a positive spin on the number, saying it “attests to the confidence in the Egyptian economy, given its ability to honor its external obligations.”