Central Bank of Egypt reports $9.7bln BoP surplus for FY 2023/24

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Despite the current economic and political challenges on the global front, the transactions of the Egyptian economy with the external world achieved an overall BoP surplus of $9.7bn during FY 2023/2024, according to the Central Bank of Egypt (CBE).

The overall surplus was mainly concentrated in the second half of the year (January/June 2024), recording $10.1bn due to the structural reforms of the Egyptian economy implemented on 6 March; which was positively reflected on the capital and financial account to record a net inflow of $29.9bn during the reporting year, on the back of the unprecedented hike in net FDI to reach $46.1bn (of which, $40.5bn was achieved in H2 of FY 2023/2024).

Concurrently, portfolio investments in Egypt shifted to a net inflow of $14.5bn. On the other hand, the current account deficit widened to register $20.8bn (against $4.7bn), primarily due to the increase in trade deficit by 27% and the decline in Suez Canal transit receipts by 24.3%.

The following factors have contributed to the rise in the current account deficit:

The trade deficit widened by $8.4bn to record $39.6bn (against $31.2bn), mainly because:

The oil-trade balance ran a deficit of $7.6bn against a surplus of $410m. This was a combined result of the following:

Oil exports decreased by $8.1bn to only $5.7bn, as a result of the decline in both:

Natural gas exports by $6.6bn to reach only $605.3m (due to the decline in exported quantities to a quarter and global prices to nearly a third), compared to approximately $7.2bn during the previous fiscal year, which witnessed a record rise in natural gas prices at the Outbreak of the Russian-Ukrainian conflict.

Oil products by $1.3bn (due to the lower exported quantities), and crude oil exports dropped by $242.8m (due to the lower exported quantities despite the price hikes).

Oil imports stabilized at $13.4bn, as a reflection of the decrease in the crude oil imports by $2.5bn (due to the lower imported quantities), which is equivalent to the increase in the imports of both oil products and natural gas by $1.9bn and $556.8m, in order (due to their higher imported quantities), on the other hand.

The non-oil trade deficit widened by $354.8m to register $31.9bn (against $31.6bn), because the rise in the value of non-oil imports surpassed that in the non-oil exports, as shown below: Non-oil merchandise imports rose by $1.4bn to $58.8bn (from $57.4bn). The rise was concentrated in the imports of waste and scrap of cast iron, passenger vehicles, wheat, and cast iron.

Non-oil merchandise exports increased by $1bn to $26.8bn (from $25.8bn). The increase was mainly in the exports of wires and cables, fresh/chilled/cooked vegetables, electric household appliances, and textiles.

Suez Canal transit receipts decreased by 24.3% to record $6.6bn (against $8.8bn), due to the decline in the net tonnage by 29.6% to register 1.1bn tons and the number of transiting vessels by 22.2%. The decrease in receipts was concentrated in H2 of FY 2023/2024 (61.7%) to record only $1.8bn. Such a decrease is due to the Red Seamaritime traffic disruptions which forced several commercial shipping companies to divert their shipping routes.

The investment income deficit widened by 1.3% to $17.5bn (from $17.3bn), primarily due to the decline in the investment income receipts by 9.7% to $1.9bn. Meanwhile, investment income payments stabilized at $19.5bn.

Remittances of Egyptians working abroad slightly retreated by 0.6% to reach $21.9bn (against $22.1bn). Notably, Egyptian workers’ remittances surged during Q4 of FY 2023/2024 (April/June 2024) by 61.4% to stand at $7.5bn (against $4.6bn in the same period of 2023).

The rise in the current account deficit was mitigated by the increase in tourism revenues by 5.5% to $14.4bn (against $13.6bn), due to the pickup in the number of both tourist nights by 5.5% to 154.1m nights and tourist arrivals by 7.4% to 14.9m tourists.

The capital and financial account revealed a net inflow of $29.9bn during the reporting period (against $8.9bn), due to the following developments:

FDI in Egypt registered a net inflow of $46.1bn – the highest level ever recorded– (against $10bn during the previous FY), as follows:

FDI in non-oil sectors increased to a net inflow of $46.4bn (against $11bn). This was mainly attributed to the inflows registered during H2 of FY 2023/2024 (January/June 2024) within the context of the implementation of the Ras El-Hekma agreement at a value of $35bn.

FDI inflows in the oil sector rose to register $5.7bn (representing greenfield investments of foreign oil companies), against $5.6bn; while transfers abroad (representing the cost recovery for exploration, development and operations previously incurred by foreign partners) retreated to record only $6bn (against $6.6bn). Accordingly, the period under review unfolded an improvement in net outflows to post only $351.6m (against $982.5m).

Portfolio investment in Egypt registered a net inflow of $14.5bn (against a net outflow of $3.8bn). This was mainly attributed to the strong appetite of foreign investors due to the performance of the Egyptian economy, especially after the economic decisions of 6 March 2024.

The change in banks’ foreign assets registered a net outflow of $18.4bn (representing an increase in assets), against a net inflow of $1.4bn, strengthening, as such, banks’ financial position.

The change in banks’ liabilities posted a net outflow of $2bn (representing a decline in liabilities), against a net inflow of $3.7bn.

The change in the CBE’s liabilities recorded a net outflow of $7.8bn (representing a decline in liabilities), against a net inflow of $2.9bn.