With a decline in receipts from tourism, the Suez Canal, worker remittances and foreign aid, Egypt’s balance of payments deficit widened to US$3.6 billion during the first three quarters of the 2015/16 fiscal year, a period spanning from July 2015 to March 2016. Over the same period in the previous fiscal year, the balance of payment deficit stood at $1 billion.
The increase in the deficit was driven by the current account deficit – a measure of the value of imported goods and services compared to exports – which reached $14.5 billion, compared to $8.3 billion a year earlier, the Central Bank of Egypt announced Sunday.
Tourism revenues posted a sharp decline during the period, falling by 40.5 percent to reach $3.3 billion. The steepest drop came between January and March when revenue fell by 62.2 percent year-on-year to reach $550.5 million.
The January-to-March quarter marked the first time that the Central Bank of Egypt has recorded a net outflow of tourism payments, with Egyptians spending around $1.2 billion on outbound travel.
Foreign aid and worker remittances from July to March also declined. The value of cash and commodity transfers reached $60.7 million, compared to $2.6 billion a year earlier. An 11 percent drop in worker remittances caused private cash transfers to drop to $4.2 billion, compared with the recorded $4.9 billion a year earlier.
Revenues from the Suez Canal fell to $3.877 billion, compared to $4.08 billion in the same period a year earlier.
The bulk of Egypt’s current account deficit has been caused by the country’s trade deficit, as the value of imports has exceeded exports by $29.3 billion during the three quarters of this fiscal year. The 2015/16 trade deficit is slightly smaller than that noted in last year’s report, which was recorded at $29.5 billion for the same nine months, with the drop in Egypt’s import bill outpacing a decline in exports.
Egypt’s capital and financial account – which includes both investment and borrowed funds – performed better, recording a net inflow of $13.9 billion compared to the $6.6 billion a year before.
Foreign direct investment rose to $5.8 billion, compared to $5.1 billion a year earlier. Portfolio investment recorded a net outflow of $1.5 billion, slowing from $2.1 billion a year earlier, largely due to repaying $1.2 billion worth of bonds that were issued in 2005 and matured during the reporting period. However, the bulk of the increase in the capital and financial account came in the “other investments” and “other assets and liabilities” categories, which recorded net inflows of $9.6 billion and $4.8 billion, respectively.
Short-term supplier credits rose to $4.77 billion, compared to $3.02 billion a year earlier. According to the Central Bank of Egypt, “This attests to the confidence in the Egyptian economy, given its ability to honor its external obligations.” It also indicates suppliers’ increased reliance on credit to finance imports.