A surge in remittances from Egyptians working abroad helped partially offset a $991.2m deficit in Egypt’s balance of payments (BOP) during the first quarter of the fiscal year (FY) 2024/25 July to September 2024), according to a report released by the Central Bank of Egypt (CBE).
Remittances increased by 84.4% to $8.3bn, up from $4.5bn during the same period last year. Despite this increase, the overall BOP recorded a deficit of $991.2m, compared to a surplus of $228.8m recorded during the same period the previous year. The overall deficit was largely driven by a significant widening of the current account deficit to $5.9bn, compared to $2.8bn in the same period last year.
The current account deficit was primarily attributed to a $6.1bn increase in the trade deficit and a 22.1% decline in the services surplus, which fell to $4.1bn. The decrease in the services surplus was mainly driven by a substantial drop in Suez Canal transit receipts. These receipts plummeted by 61.2%, reaching $931.2m, down from $2.4bn, as a result of ongoing Red Sea tensions disrupting maritime navigation. These tensions led to a 68.4% decrease in net tonnage, falling to 127.2m tons, and a 51% reduction in the number of transiting vessels, according to the CBE.
The increase in the current account deficit was partially offset by a surge in current transfers, which increased by 84.7% to $8.4bn, primarily due to a sharp rise in remittances from Egyptians working abroad. There was also an increase in tourism revenues. Tourism revenues increased by 8.2% to $4.8bn, up from $4.5bn, driven by a rise in tourist nights to 51.6 million, compared to 47.7 million during the same quarter last year. However, payments via e-cards abroad decreased by 59.7% to $406.7m, down from $1bn, the report noted. Investment income deficit also decreased by 7.2% to $4.3bn, due to an increase in investment income receipts by 60% to $660.6m.
The non-oil trade deficit increased by $3.2bn, reaching $9.8bn, compared to $6.6bn in the same period last year. Non-oil merchandise import payments rose by $4.4bn to $17.7bn. This increase was mainly concentrated in the imports of wheat, soya beans, pharmaceuticals, gauze pads, vaccines, spare parts, and accessories for electric household appliances. Non-oil merchandise export proceeds also rose, but by a smaller amount, increasing by $1.2bn to $7.9bn. These increases were concentrated in exports of fresh and dried fruits, aluminium and related articles, fresh, chilled, and cooked vegetables, and wires and cables.
The deficit in the oil trade balance widened by $2.9bn to $4.2bn, compared to $1.3bn in the previous year. This was driven by a $2.5bn increase in oil imports to $5.4bn, resulting from higher imports of both oil products and natural gas, by $1.5bn and $1.2bn respectively, while crude oil imports retreated by $191.9m. Oil exports decreased by $415.8m, reaching $1.2bn, driven by the decrease in crude oil and natural gas exports by $526.6m and $24.2m, respectively. However, exports of oil products increased by $135m.
In contrast to the current account deficit, the capital and financial account recorded a net inflow of $3.8bn, up from $1.8bn, due to foreign direct investment (FDI), portfolio investment, net external borrowing and change in net foreign assets of the banking sector. FDI in Egypt registered a net inflow of $2.7bn, compared to $2.3bn, with a net inflow of $2.9bn in the non-oil sector. This comprised of $304.9m from the proceeds of selling local entities to non-residents, and $1.1bn in greenfield investments and capital increases of existing companies. Net investment inflows for real estate purchases by non-residents reached $359.4m, and net reinvested earnings registered $1.2bn. Net FDI outflows in the oil sector retreated to $175.7m, down from $247.8m.
The net outflows of portfolio investment in Egypt decreased to $384.7m, down from $523.4m. The change in banks’ foreign assets registered a net inflow of $2.1bn, while the change in banks’ liabilities posted a net inflow of $729.8m. The change in the CBE’s liabilities recorded a net inflow of $115.2m, compared to $2.0bn in the previous year.
