Most prominent BoP indicators show improvement in 1H 2022/23: CBE

Hossam Mounir
5 Min Read

Egypt’s current account deficit declined by 77.2% to $1.8bn during the first half (1H) of FY 2022/23, compared to $7.8bn in 1H 2021/22, according to the Central Bank of Egypt (CBE).

This was largely attributed to the decline in the trade deficit by $6.2bn or 28.4% to $15.5bn, and the service surplus doubled, driven by the increase in both tourism revenues and Suez Canal receipts.

Moreover, the capital and financial account recorded a net inflow of $2.8bn as the net inflows of FDI in Egypt rose to $5.7bn. 

On the other hand, portfolio investments in Egypt realized a net outflow of $3.bn. As a result, the balance of payments (BoP) recorded an overall surplus of $599.1m in July/Dec. 2022.

The non-oil trade deficit dropped by $6.5bn to $17.3bn from $23.8bn, primarily due to the decrease in non-oil merchandise imports by $6.3bn. The non-oil merchandise imports dropped by 17.3% to $30.2bn (from $36.5bn). The decline was concentrated in the imports of passenger vehicles, telephones, and spare parts and accessories for cars and tractors.

Non-oil merchandise exports slightly rose by $124.8m, to $12.9bn (from US$ 12.8bn). The increase was mainly in the exports of gold, phosphate/mineral fertilizers, and transmitter and receiver devices of radio/television. 

The oil trade balance ran a surplus of $1.8bn (against $ 2.1bn). This was an outcome of the rise in oil exports by $ 690.6m (owing to the increase in natural gas exports by $ 2.0bn, which was mitigated by the decline in the exports of both crude oil by $690.5m and oil products by $652.4m). Additionally, oil imports rose by $ 980.3m (reflecting the increase in the imports of oil products by $554.1m and natural gas by $382.4m).

Tourism revenues rebounded by 25.7% to $7.3bn (against $5.8bn), driven by the rise in the number of tourist nights by 27.2% to 78.4 million, and tourist arrivals to Egypt by 27.5% to 6.8 million.

Transport receipts recovered by 45.1% to $6.8bn (against $4.7bn), as a main result of the rise in Suez Canal receipts by 17.8% to $4.0bn (against $3.4bn), due to the pickup in the net tonnage of vessels by 13.3% to register 753.3 million tonnes.

The factors that mitigated the improvement of the current account: The decline in remittances of Egyptians working abroad by 23.0% to $12.0bn (against $15.6bn).

The rise in investment income deficit by 25.5% to $8.9bn (against $7.1bn). This was the result of the following: pickup in investment income payments by $2.0bn to $9.6bn (against $7.6bn), reflecting the rise in both interest payments on external debt and earnings on FDI in Egypt.

An increase in investment income receipts by $203.4m to $697.9m (against US$ 494.5 million) was also observed, mainly due to the higher interest on residents’ deposits at banks abroad.

The capital and financial account achieved a net inflow of only $2.8bn in July/Dec. 2022 (against $11.4bn y-o-y).

This is due to some developments. They include the net outflow of portfolio investment in Egypt that rose to about $3.0bn (against $2.5bn). This coincided with the contractionary monetary policies adopted by the Federal Reserve that led to the exodus of hot money from the emerging markets.

Moreover, foreign assets at banks moved up by $1.8bn during the period under review (representing an outflow), against a decline of $8.3bn (representing an inflow) in the corresponding period.

Net inflow of FDI in Egypt went up to record $5.7bn (against $3.3bn). The FDI in non-oil sectors surged to register a net inflow of $6.6bn (against $4.4bn) as a main result of the pickup in net greenfield investments and capital increases of existing companies to $2.2bn (against $1.0bn). The proceeds of selling local entities to nonresidents increased to $1.1bn (against $340.8m).

Similarly, net retained earnings increased to $3.0bn (against $2.6bn).

Additionally, the net outflow of FDI in the oil sector declined by $277.9m to only $857.5. This was the result of the rise in total inflows (representing new investments of foreign oil companies) to $2.6bn (against $2.2bn) as well as the increase in outflows (representing the cost recovery for exploration, development and operations previously incurred by foreign partners) by $161.6m to $3.5bn.

The change in the CBE’s liabilities posted a net inflow of $1.5bn (against $2.3bn).

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