Egypt: International reserves at Central Bank drop
During FY 2008/2009, Egypt's BOP ran an overall deficit of US$3.4 billion, with the international reserves at the CBE falling by an equivalent amount. The BOP deficit was an outcome of a current account deficit of US$ 4.4 billion (as trade deficit exceeded the surplus on services and net unrequited transfers) and a net inflow of US$ 1.4 billion in the capital and financial account.
Merchandise export proceeds declined by US$ 4.2 billion or 14.3 percent, to stand at US$ 25.2 billion. The decline reflected the fall in oil exports by 24.0 percent (the drop in world oil prices and the slowdown of world economy were key factors) and in non-oil exports by 4.8 percent (driven by raw materials and finished goods, whereas exports of semifinished goods increased). Similarly, merchandise import payments declined by US$ 2.4 billion or 4.6 percent to US$ 50.3 billion. It reflected the decrease of 26.4 percent in oil imports, given that non-oil imports almost remained at the same previous level.
Services balance went down by 16.5 percent to US$ 12.5 billion (against US$ 15.0 billion a year earlier). That was attributed to the decrease in Suez Canal receipts by 8.4 percent to US$ 4.7 billion (against US$ 5.2 billion), and the contraction in tourism revenues by 3.1 percent to US$ 10.5 billion (from US$ 10.8 billion a year earlier), affected by the decline in the number of tourist nights on the back of the worsening global economic conditions. Another contributing factor was the decline in foreign investment income receipts by 41.1 percent to US$ 1.9 billion from US$ 3.3 billion in the previous FY, because of the drop in the investment income on debt instruments in world markets, affected by the global financial crisis since Sept. 2008.
Net unrequited transfers shrank by 11.7 percent, reaching US$8.2 billion during the year under review, as a result of weak private transfers (mainly remittances of Egyptians working abroad), going down by 8.9 percent to US$ 7.6 billion (against US$ 8.4 billion); and lower cash and commodity grants to the Egyptian government.
The capital and financial account for FY 2008/09 revealed that net FDI in Egypt declined by 38.7 percent to US$ 8.1 billion (against US$ 13.2 billion during the previous FY). The decline was attributed to the abatement of the net greenfield investments, or capital increases, from US$ 6.4 billion to US$ 2.3 billion and also privatization proceeds from US$ 2.3 billion to only US$ 0.3 billion, whereas net direct investments in the petroleum sector increased, reaching US$ 5.4 billion (against US$ 4.1 billion). Portfolio investment in Egypt unfolded a net outflow of US$ 9.2 billion (against US$ 1.4 billion during the previous FY), including foreigners' investments in Egyptian TBs in the amount of US$ 7.1 billion (outflow)