Egypt's external financial transactions saw an improvement in the period between July 2020 and March 2021, with the balance of payments (BOP) recording an overall surplus of $1.8bn. This took place against a deficit of $5.1bn a year earlier that was realised in the wake of the novel coronavirus (COVID-19) pandemic. Such an improvement has proven the Egyptian economy's ability to quickly recover from the crises that have hit the global economy. The current account registered a deficit of $13.3bn, against $7.3bn in the corresponding period. This was mainly attributed to the fact that the country's tourism revenues registered less than one-third of the revenues realised in the corresponding period of the previous fiscal year. These have been affected by the great shock that hit international tourism due to the COVID-19 pandemic, a crisis that the global economy is still suffering from. The capital and financial account achieved a net inflow of $17.1bn, against $4.1bn in the corresponding period. It reflects the noticeable improvement in foreign portfolio investments, due to the continued easing of policies in global financial conditions, despite the ongoing uncertainty caused by the COVID-19 pandemic. The increase also reflects the confidence of foreign investors in the Egyptian economy. The following is a review of the main developments in the BOP performance in July2020-March 2021, relative to the same period of the previous FY 2019/2020. The factors that triggered the widening of the current account deficit included the service surplus dropping by 62.2% to post only $3.2bn compared to $8.4bn. The drop was mainly due to several reasons, including the decline in tourism revenues by 67.4% to only $3.1bn, against $9.6bn. It was also driven by the fall in transport receipts by 12.9% to $5.5bn, against $6.3bn, due largely to the decrease in aviation company receipts because of the COVID-19 pandemic, and the retreat in Suez Canal receipts. Meanwhile, the non-oil trade deficit widened by 12.7%, or $3.5bn, to post $30.7bn (against $27.3bn), as the increase in non-oil imports surpassed that of non-oil exports. Non-oil imports rose by $4.5bn to $45.4bn. Such a rise was concentrated in the imports of medicines, sterilisation equipment used during the pandemic, corn, spare parts and accessories for cars and tractors, and railway locomotives. Non-oil exports moved up by only $1.0bn, to register $14.6bn, concentrated in exports of household electrical appliances and wires and cables. The positive factors that helped mitigate the aggravation of the current account deficit included workers' remittances increasing by 8.5%, to $23.4bn (from $21.5bn). The decline in oil imports to $2.3bn surpassed that in oil exports, which was reported at $1.4bn, leading as such to an improvement in the oil trade balance. This ensured it registered a surplus of $174.9m (compared to a deficit of $773.3m). Egypt's investment income deficit narrowed by 3.6%, or $326.4m, to stand at $8.9bn compared to the previous $9.2bn, mainly because the fall in income paid outpaced that of income earned. Investment income payments declined by $689.2m, to register $9.2bn, reflecting the drop in the profits of foreign oil firms operating in Egypt. These were adversely impacted by the plunge in world oil prices. The payments were also adversely affected by the interest payments on foreign debt. Meanwhile, investment income receipts shrank by $362.8m, to only $320.1m, due to the decrease in interest payments on deposits abroad. Net inflows of the capital and financial account rose by $13.0bn, to register $17.1bn during July 2020 to March 2021, compared to $4.1bn in the same period a year earlier. This was the result of several main developments, including portfolio investment in Egypt achieving a net inflow of $16.0bn against a net outflow of $7.9bn in the corresponding period. Net inflows of foreign direct investment (FDI) in Egypt decreased by 19.3%, to post $4.8bn (against $5.9bn). The decrease was an outcome of developments, including investments in the oil sector recording a net outflow of $322.5m against a net inflow of $787.6m. Meanwhile, investments in the non-oil sectors remained unchanged at $5.1bn, on the back of the differences between the income earned and paid from and to the external world on portfolio investment, direct investments, bank deposits, and foreign debt. The rise in net inflows for greenfield investments and capital increased by $154.8m, or 41.4%, to $528.3m. There was also a retreat in proceeds from selling companies and productive assets to non-residents by $38.3m to $54.5m. There was a $114.6m decline in inflows for real estate purchases in Egypt by non-residents, to stand at $453.7m. Meanwhile, retained earnings and credit balances surplus stabilised at $4.1bn, and net disbursements of medium- and long-term loans and facilities recorded $5.0bn, against $2.0bn.
