Egypt's trade balance received a pat on the back by the floatation of the pound. The move, resulting in the pound losing almost half its value, made Egyptian goods in foreign markets attractively cheaper while doubling the cost of importing. Theoretically, this should lead to a rise in exports and a reduction in imports, which would help Egypt trim its trade deficit that stood at $42.64 billion in 2016. In recent statements, Minister of Trade and Industry Tarek Kabil said the country's trade deficit during the first nine months of 2017 had declined by 33 per cent compared to the same period in 2016. Kabil said the deficit stood at $23.39 billion during the first nine months of 2017, compared to $34.86 billion in the corresponding period of 2016, adding that Egypt's non-petroleum exports increased by 11 per cent in the same period year-on-year, reaching $16.490 billion. Egypt's imports, meanwhile, decreased by 20 per cent during the same nine months to $39.880 billion compared to $49.740 billion last year, according to Kabil. Chairman of the Egyptian Businessmen's Association (EBA) Ali Eissa said the figures indicate a “big success”. Eissa said the floatation had helped Egypt increase its exports and helped substitute imported products with local ones, benefiting the local industry. He said local industry has been put under pressure for years and that it has been unable to compete with imported products. Now, though, it is developing itself and factories are expanding to meet local demand. “Trade deficit figures are very promising. There's no doubt that today is better than yesterday,” Eissa told Al-Ahram Weekly. He said that what has been accomplished since the floatation has been “a great success” in terms of fiscal reform and that for this success to continue, more economic and legislative reforms were needed. While Trade Ministry's figures might indicate considerable success in trimming the trade deficit, figures from the Central Bank of Egypt (CBE) might show otherwise. According to the CBE, the trade deficit declined by 8.4 per cent in fiscal year 2016/2017 to $35.4 billion, from $38.7 billion a year earlier. The decline is attributed to a 15.9 per cent rise in merchandise exports to $21.7 billion, from $18.7 billion, thanks to the rise in both non-oil and oil exports. What came as a surprise was the minimal decline in imports. The CBE figures show that merchandise imports dropped in fiscal year 2016/2017 year-on-year by a mere 0.5 per cent, to register $57.1 billion, compared with $57.4 billion a year earlier. Non-oil imports declined by 4.5 per cent to $45.9 billion, while oil imports increased by $1.9 billion, the CBE said. Head of the importers division at the Cairo Chamber of Commerce Ahmed Shiha is sceptical about the official figures in general, saying they are “misleading”. He said imports might have decreased at the official level but not in real terms. He said the increased cost of imports in addition to the restrictions imposed on imports have prompted some importers to shun legal channels and resort to smuggling to get their goods into the market. Moreover, Shiha explained that costly imports after the floatation have pushed some importers to halt their activities, which resulted in a shortage in imported capital goods and raw materials needed by various industries. “This has led to problems in production such as the shortage that happened in the pharmaceutical industry,” Shiha told the Weekly. As for exports, he said that they did not increase and that the floatation did not boost the competitiveness of Egyptian products, giving it a competitive price edge, as most industries rely on imported goods for production. He gave an example of agriculture products that use imported fertilisers and seeds. “Even the products that do not need imported production inputs such as petroleum are tied to international prices that they cannot divert from,” Shiha said. He explained that most exports do not add a value as most of them are products that are merely assembled in Egypt for export purposes to benefit from the country's trade agreements with other countries. In order for exports to have value, he said they should contain at least 50 per cent local components. “This is when we can benefit from exports,” Shiha said. Despite conflicting figures, the floatation seems to have helped Egypt trim its trade deficit, to an extent. In an interview with Reuters in September, Kabil said that exports this year will be higher than last year, expecting them to reach $22 billion, up from $20 billion. In March, the Trade Ministry revealed a strategy to almost double the nation's exports by the year 2020 to $34 billion. The strategy includes implementing new export plans and policies, as well as targeting new markets for cement, agricultural products, ready-made clothes, construction materials, chemical products, and engineering and electronic goods.
