CAPMAS announces decrease in value of imports in June, experts say different story in dollars

Egypt’s trade deficit dropped by 15.7 percent year-on-year to LE29.7 billion, state statistics agency CAPMAS announced Wednesday, but experts say such comparisons are more realistic when viewed in US dollars, due to the drop in the exchange rate of the Egyptian pound.

The narrowing trade deficit is tied to a drop in the value of the pound, which fell to an official rate of LE8.88 per dollar and LE12 on the parallel market.

“This difference was expected,” said Omar al-Shenety, executive director of the Dubai-based private equity firm Multiples Group for Investment, who explained, “With the depreciation of the local currency, the value of exports in Egyptian pounds increases. Thus, if the export volume remains constant, its value will increase.

The value of Egypt’s exports reached LE17.7 billion in June, according to CAPMAS, an increase of 15.9 percent compared to the same month last year. Meanwhile, the value of imports declined by 6.3 percent year-on-year to reach LE46.8 billion in June.

“There are many obstacles imposed on imports by the State – specifically by the Ministry of Commerce and Industry, the Customs Authority and the Central Bank. In turn, this leads to a decrease in the value of imports,” Shenety explained.

The decline in imports is largely due to a 3.9 percent drop in the value of imported petroleum products, along with a 13.2 percent drop in the value of raw materials imported for the iron and steel industry. The value of imported wood and wood products decreased by 23.8 percent, and dairy products also saw steep declines, CAPMAS added.

By contrast, the value of imported passenger cars increased by 10.2 percent, while medicines and pharmaceuticals increased by 21.6 percent, with the value of meat imports increasing by 26.2 percent.

CAPMAS noted a 17.1 percent increase in the value of pulp and food products, a 145 percent increase in fertilizer exports and furniture — by 29.8 per cent, while soap and cleaning products increased by 133.3 percent.  The rate of exports also declined for some commodities, such as crude oil, which amounted to an increase of 6.1 percent, fresh fruit by 7 percent, petroleum products by 21.7 percent and garments by 7.8 percent.

Although the decline in the trade deficit would seem to reflect an increase in Egypt’s exports over its imports, the currency rate differentials do have a tangible impact on these figures in Egyptian pounds.

Speaking to Mada Masr, Riham al-Dessouki, chief analyst for the UAE-based investment bank Arqaam Capital, explained: “These figures, when expressed in Egyptian pounds, give a good impression. But turn them into US dollars, and we will find that significant changes have not occurred in comparison to March and April, for example.” Thus this statement from CAPMAS may be misleading if the real value and exchange rate of the Egyptian pound are not taken into consideration.

Shenaty explained, “It would have been better to use the US dollar in the statement, not the Egyptian pound, so as to be able to read these figures accurately, for the sake of comparing them with previous rates, especially with the depreciation of the local currency. This would translate into an increase in import prices, and a decrease in export prices.”

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