Egypt's PM heads to Japan for TICAD 9 Africa development summit    National Council for Childhood reviews plan to combat child labour    Egypt's Supreme Organ Transplant Committee strengthens oversight, standards    Indian tourist arrivals to Egypt jump 18.8% in H1-2025: ministry data    African agribusiness market expected to reach $1tr by 2030    Price cuts underway across Egypt, says trade federation report    Zelenskyy seeks US security guarantees as Trump says he can 'end war now'    Israelis protest for hostage deal amid growing pressure on Netanyahu    Serbia's Vucic vows 'tough measures' against protesters after unrest    Egyptian pound down vs. US dollar at Monday's close – CBE    Egypt's FM, Palestinian PM visit Rafah crossing to review Gaza aid    Egypt delivers over 30 million health services through public hospitals in H1 2025    Egypt recovers collection of ancient artefacts from Netherlands    Egypt harvests 315,000 cubic metres of rainwater in Sinai as part of flash flood protection measures    Egypt, Namibia explore closer pharmaceutical cooperation    Fitch Ratings: ASEAN Islamic finance set to surpass $1t by 2026-end    Renowned Egyptian novelist Sonallah Ibrahim dies at 88    Egyptian, Ugandan Presidents open business forum to boost trade    Al-Sisi says any party thinking Egypt will neglect water rights is 'completely mistaken'    Egypt's Sisi warns against unilateral Nile measures, reaffirms Egypt's water security stance    Egypt's Sisi, Uganda's Museveni discuss boosting ties    Egypt, Huawei explore healthcare digital transformation cooperation    Egypt's Sisi, Sudan's Idris discuss strategic ties, stability    Egypt's govt. issues licensing controls for used cooking oil activities    Egypt to inaugurate Grand Egyptian Museum on 1 November    Egypt's Sisi: Egypt is gateway for aid to Gaza, not displacement    Greco-Roman rock-cut tombs unearthed in Egypt's Aswan    Egypt reveals heritage e-training portal    Sisi launches new support initiative for families of war, terrorism victims    Egypt expands e-ticketing to 110 heritage sites, adds self-service kiosks at Saqqara    Palm Hills Squash Open debuts with 48 international stars, $250,000 prize pool    On Sport to broadcast Pan Arab Golf Championship for Juniors and Ladies in Egypt    Golf Festival in Cairo to mark Arab Golf Federation's 50th anniversary    Germany among EU's priciest labour markets – official data    Paris Olympic gold '24 medals hit record value    A minute of silence for Egyptian sports    Russia says it's in sync with US, China, Pakistan on Taliban    It's a bit frustrating to draw at home: Real Madrid keeper after Villarreal game    Shoukry reviews with Guterres Egypt's efforts to achieve SDGs, promote human rights    Sudan says countries must cooperate on vaccines    Johnson & Johnson: Second shot boosts antibodies and protection against COVID-19    Egypt to tax bloggers, YouTubers    Egypt's FM asserts importance of stability in Libya, holding elections as scheduled    We mustn't lose touch: Muller after Bayern win in Bundesliga    Egypt records 36 new deaths from Covid-19, highest since mid June    Egypt sells $3 bln US-dollar dominated eurobonds    Gamal Hanafy's ceramic exhibition at Gezira Arts Centre is a must go    Italian Institute Director Davide Scalmani presents activities of the Cairo Institute for ITALIANA.IT platform    







Thank you for reporting!
This image will be automatically disabled when it gets reported by several people.



Egypt expects higher current account deficit in third quarter
Published in Daily News Egypt on 06 - 03 - 2011

CAIRO: Egypt's central bank (CBE) expects its current account deficit at the end of the third quarter of the current financial year to double over the previous quarter, reaching a deficit of more than $3 billion, Reuters reported.
The July-December 2010 quarter deficit was $1.4 billion. The third quarter ends March 31.
"It is expected that the balance of payments at the end of the third quarter of the current financial year which ends on March 31, will register a deficit of more than $3 billion," the central bank said in a statement
The CBE said that falling tourism revenues, diminishing remittances from workers abroad and declining foreign investment resulted in a deficit increase after weeks of tumult brought down the regime of former president Hosni Mubarak.
In an emailed statement, investment bank Beltone Financial said that the current account will be impacted negatively by a temporary reduction in exports and weaker tourism receipts, but this will be partly offset by a reduction in imports as domestic demand slows down
“The capital and financial account will also be impacted, negatively, through a reduction in foreign direct and portfolio investment inflows. Consequently, Egypt's external position will weaken, but would rebound once the political situation stabilizes,” the statement added.
Magda Kandil, director of research at the Egyptian Center for Economic Studies, said that the loss of foreign reserves could weigh on the pound as the supply of dollars falls below growing demand.
“This loss could end if the fundamentals of the economy improve to reverse the downward trend in tourism, FDI, remittances and exports,” she said.
For Kandil, the government may not be able to influence the current account much directly, but there is plenty to do indirectly.
The government can try to provide more political stability and address security concerns, it can enforce an economic strategy that increases investor confidence about the direction of policies, uphold earlier reforms in support of private-led growth, while enforcing new reforms aiming at establishing better institutions, good governance, rule of law, accountability and transparency.
“The fiscal deficit is a big drag on the economy and fiscal consolidation should arrest concerns about rising debt and the cost of borrowing,” she said.
Commenting on the current government's stance towards the recent events and their effect on the economy, Kandil said that fiscal stimulus in the form of capital spending and investing in capacity building, including in infrastructure and health and education services, cannot be justified unless the government have the fiscal space that would allow access to financing without facing liquidity and solvency risks.
“To my knowledge, the LE 5 billion stimulus package is in the form of compensation for losses. Most of that spending will be spent by the recipients on consumption, which could accelerate inflation, without increasing productive capacity. Deterioration in the fiscal deficit will crowd out resources available for the private sector,” she added.
The problem with ongoing social agenda is that it is reacting to short-term pressures, without having a long-term vision.
Given the projected increase in the deficit, Kandil believes that a comprehensive social agenda should be integrated in the context of broad-based reform of the public finance to trim the waste in spending, including in the form of untargeted subsidies, and mobilizing additional revenues.
“In short, with limited revenues, spending priorities for fiscal stimulus should be carefully managed to boost productive capacity in support of private sector-led growth that avail more jobs for the unemployed. The best solution for social equity is to create more jobs and grow wages in line with productivity,” she concluded.
In the period July to December 2010, the CBE said imports grew faster than exports and investment income shrank, according to Reuters.
It reported a rise in imports of 10.9 percent to $26 billion dollars, due to a 33.6 percent rise in petroleum imports, and non-petroleum imports by 8.5 percent. Exports rose by about 10 percent.
Investment income decreased 58.3 percent to $211 million from $506 million in the same period of 2009, it said.
Tourism revenues in July-December grew 15.6 percent to $6.9 billion in July-December 2010, the statement said, adding that transfers, including remittances from abroad, increased 45.3 percent to $6.3 billion and and Suez Canal revenues rose by 10.9 percent to $2.5 billion. –Additional reporting by Reuters.


Clic here to read the story from its source.