Egypt's overall balance of payment widens

Egypt ran an overall balance of payments deficit of $1bn for the first half of the 2014/15 fiscal year, compared to a surplus of around $2 billion in the same period the year before, Egyptian media said on Sunday.

Egypt’s current account deficit - which marks the gap between the flow of goods, services and cash transfers into, versus out of the country - widened to $4.3bn. 

At the same time last year, the current account deficit stood at $866m, reported Mada Masr. The Central Bank of Egypt attributes the deficit to $3bn in repayments of bonds and deposits. 

In November, the government repaid $2.5 billion in central bank deposits made by Qatar, according to the Egyptian daily.

The ministry has defended the financial gap by saying that the widening deficit is a reflection of “the commitment and ability of the Egyptian economy to honor its external obligations on a timely basis.”

Analysts, however, have said that the figures are a reflection of a widening trade deficit, a net outflow of portfolio investment and a fall in grants to the government, which could be happening despite a rising tourism revenue and a small increase in foreign direct investment.

The current account deficit was driven by a 33.6 percent increase in the trade deficit, which exceeded $20 billion, mostly driven by merchandise imports. 

From July-December, Egypt imported more than $32.4 billion worth of goods, while exporting around $12.2 billion worth according to Mada Masr.

Repayments of bonds and central bank deposits led to net outflows for both portfolio investment and central bank liabilities. 

A slight bump in foreign direct investment, which rose from around $2.07 billion to reach $2.73 billion was not enough to outweigh the overall outflow of funds.