Marginal overall BoP deficit of only $14.1m in 1H 2021/22

Egypt's transactions with other countries resulted in minor widening of current account deficit

Egypt's transactions with the external world resulted in a minor widening of the current account deficit, comprising merchandise and service transactions, income, Egyptian workers' remittances, and government and private grants, recording $7.8bn against $7.6bn in the same period a year earlier.
This marginal increase in the deficit resulted from the following developments:
Non-oil trade deficit widened by 24.2%, to register $23.8bn (up from $19.1bn in the corresponding period); as the increase in non-oil imports surpassed that of non-oil exports: Non-oil merchandise imports rose by $8.1bn to $36.5bn.
The rise was concentrated in the imports of production inputs, such as propylene polymers and inorganic or organic compounds; and imports of agricultural products, mainly soybeans, wheat, and corn, due to the rise in their global prices.
Additionally, there was an increase in the imports of pharmaceutical preparations, gauze pads and vaccines (in light of the country's efforts to combat COVID-19 pandemic).
Meanwhile, non-oil merchandise exports increased by $3.4bn to $12.8bn. The increase was mainly driven by the exports of finished goods, which largely consisted of phosphate or mineral fertilizers, household electric appliances, ready-made clothing, medicines, wires and cables, articles of aluminium and glassware. There was also a pronounced increase in the exports of semi-finished goods, mainly inorganic or organic compounds and ethylene-propylene polymer.
Investment income deficit† grew to $7.1bn (up from $5.4bn), as a result of the following: − Investment income payments went up by $2.0bn, to register $7.6bn, reflecting the rise in both:
Earnings of FDI in Egypt; and o Interest and dividends of non-residents' investments in Egyptian bonds and securities.
Investment income receipts increased by $371.4m to reach $494.5m, due to the rise in interest and dividends on foreign bonds and securities. The rise in the current account deficit was mitigated by the following positive factors:
The oil trade balance shifted from a deficit of $54.2m to a surplus of $2.1bn. This came as a main result of the rise in the value of natural gas exports by $2.6bn, due to higher exported quantities, as well as the noticeable pickup in global prices that also led to the rise in exports and imports of crude oil, in value terms, despite the contraction in their quantities.
This improvement was curbed by the increase in import payments for oil products, owing to higher imported quantities.
The services surplus improved by $3.8bn to reach $5.6bn, mainly as an outcome of the following factors:
Tourism revenues rose to $5.8bn (from $1.8bn in the corresponding period).
Transport receipts increased by 27.9% to reach $4.7bn (from $3.6bn), mainly on the back of the rise in Suez Canal receipts by 16.6% to record $3.4bn (from $2.9bn).
Workers' remittances continued to edge upwards increasing by 0.4% to record $15.6bn. The capital and financial account (including foreign direct investment (FDI), portfolio investment, and net external borrowing) recorded a net inflow of $11.4bn (against $9.2bn).
The following is a review of the main developments: FDI in Egypt recorded a net inflow of $3.3bn, as shown below:
Foreign Direct Investment in Non-oil Sectors: FDI in non-oil sectors increased by $1.2bn, to record a net inflow of $4.4bn, as a result of the following: Net inflows for greenfield investments or capital increases of existing companies increased by $775.6m, to register $1.4bn ($160.0m of which went to greenfield investments); The sale proceeds of companies and productive assets to nonresidents rose by $308.1m, to record $340.8m; Net inflows for real estate purchases by non-residents mounted by $145.5m, to register $409.2m; and Net retained earnings and credit balances surplus slightly fell by 1.2%, to stand at $2.2bn.
Foreign Direct Investment in the Oil Sector: FDI in the oil sector registered a net outflow of $1.1bn from the net inflow of $158.8m in the corresponding period. This came on the back of: The rise in outflows to $3.3bn, from $2.9bn (representing cost recovery for exploration, development and operations previously incurred by foreign partners); and the decline in total inflows (representing new investments of foreign oil contractors) to only $2.2bn (from $3.0bn).
Portfolio investment in Egypt shifted from a net inflow of $10.2bn to a net outflow of $2.5bn.
Net disbursement of medium- and long-term external loans and facilities decreased to $779.8m (from $4.5bn).
The above-mentioned developments resulted in a marginal overall BoP deficit of only $14.1m (representing the change in reserve assets at the CBE).