Balance of payments

Egypt’s current account deficit narrowed to USD 13.2 bn in the first nine months of FY 2024-25, down from USD 17.1 bn recorded in the same period a year earlier, according to central bank figures (pdf). Most of the improvement came in 3Q, when the current account deficit narrowed 69.3% y-o-y on the back of surging remittances, higher tourism revenues, and a jump in non-oil exports.(Tap or click the headline above to read this story with all of the links to our background as well as external sources.)BoP turns to the red: The overall balance of payments recorded a USD 1.9 bn deficit during the nine-month period, compared with a USD 4.1 bn surplus a year earlier. The shift “was mainly attributed to the decline in the net inflows of the capital and financial account, recording USD 7.7 bn compared to unprecedented inflows of USD 20 bn in the corresponding period, which included Ras El Hekma deal.”DRIVING THE IMPROVEMENT-#1- Remittances soared: Remittances from Egyptians abroad jumped 82.7% y-o-y to USD 26.4 bn during the nine-month period, up from USD 14.5 bn a year earlier.#2- Tourism revenues continued to climb, rising 15.4% y-o-y to USD 12.5 bn, supported by a pickup in tourist nights to 134.3 mn from 116.4 mn.#3- Investment income deficit eased: The investment income deficit narrowed 13.4% y-o-y to USD 12.2 bn, as investment income payments fell 6.9% to USD 14.1 bn and receipts jumped 74.0% to USD 1.9 bn.DRAGGING THE BALANCE-#1- Non-oil trade deficit widened to USD 28 bn, up from USD 23.7 bn in 9M FY 2023-2024, due to increased spending on wheat, soybeans, spare parts for cars and tractors, maize, and raw tobacco. Imports jumped to USD 53.6 bn and the rise in exports wasn’t not enough to help offset the increase.Non-oil exports rose 31.3% y-o-y to USD 25.6 bn, up from USD 19.5 bn, driven by a jump in gold, clothing, fruit, cables, and aluminum exports.#2- Oil trade deficit doubled: The oil trade deficit expanded to USD 10.3 bn from USD 5.1 bn a year earlier, as oil imports rose to USD 14.5 bn on the back of higher gas, oil products, and crude imports. Meanwhile, oil exports inched down to USD 4.2 bn from USD 4.6 bn due to falling crude and gas shipments, partially offset by a rise in product exports.#3- Suez Canal revenues plummeted: Suez Canal receipts fell 54.1% y-o-y to USD 2.6 bn during the first nine months of the last fiscal year, with net tonnage down 61.9% and vessel transits falling 44.8% amid continued Red Sea disruptions.#4- FDI inflows cooled off: Net FDI into Egypt fell to USD 9.8 bn from USD 23.7 bn, when inflows were inflated by the Ras El Hekma agreement. Non-oil FDI inflows came in at USD 9.1 bn, while oil FDI recorded a net inflow of USD 669.6 mn after a net outflow a year earlier.#5- Portfolio inflows dropped: Portfolio investment in Egypt registered a net inflow of USD 2.1 bn during the period, down from USD 14.6 bn in 9M 23-24.#6- Debt repayments weighed on the balance: Egypt recorded a net repayment of USD 2.6 bn on medium- and long-term loans during the period between July 2024 and March 2025, compared to USD 1.9 bn a year earlier. REMEMBER- Egypt’s current account deficit widened to USD 11.1 bn in 1H FY 2024-2025, driven by a rise in the trade deficit and a drop in Suez Canal revenues. The BoP was also in deficit during that period, recording USD 502.6 mn.

Egypt’s current account deficit widened to USD 11.1 bn in 1H FY 2024-2025, up from USD 9.6 bn in the same period last fiscal year, driven by an increase in the trade deficit and a drop in Suez Canal revenues, according to central bank figures (pdf).(Tap or click the headline above to read this story with all of the links to our background as well as external sources.)BoP still in the red: The overall balance of payments recorded a deficit of USD 502.6 mn during the six-month period, compared with a USD 409.6 mn deficit a year prior.DRIVING THE RISE-#1- Suez Canal revenues tumbled: Transit receipts from the Suez Canal dropped 62.3% y-o-y to USD 1.8 bn on the back of Red Sea disruptions that pushed ships to reroute away from the canal. Net tonnage fell 69.2% and vessel transits were down 52.2%.#2- Non-oil trade deficit widened: The non-oil trade deficit grew 33.8% y-o-y to USD 20.8 bn as non-oil imports rose 26.9% to USD 36.6 bn due to increased spending on wheat, soybeans, pharma products, and car parts imports. This increase was slightly offset by a modest increase in non-oil exports, which were up 18.8% y-o-y, reaching USD 15.7 bn, driven by exports of wires and cables, clothing, aluminum, and fruit.#3- Oil imports surged: Oil imports jumped 53.3% y-o-y to USD 9.7 bn due to higher imports of natural gas, oil products, and crude oil. Meanwhile, oil exports fell 7% y-o-y to USD 3 bn on the back of lower crude and gas exports. This pushed the oil trade deficit to USD 6.7 bn from USD 3.1 bn last year.#4- Portfolio investments reversed: Portfolio investment in Egypt registered a net outflow of USD 3.7 bn, compared to a net inflow of USD 253 mn a year earlier.EASING THE PRESSURE-#1- FDI inflows grew: Net FDI inflows rose to USD 6 bn from USD 5.5 bn a year ago. The bulk of the figure came from non-oil sectors, led by greenfield investments, real estate purchases by non-residents, and reinvested earnings.#2- A jump in remittances: Remittances from Egyptians abroad soared 80.7% y-o-y to USD 17.1 bn, as flows returned to official channels after the float of the EGP put an end to the parallel market that had pushed remittance flows through unofficial channels.** READ MORE- We dive into the latest remittances figure and the reason behind their continued upward pace in a story published last month. Check it out here.#3- Tourism revenues on the rise: Tourism revenues rose 12.4% y-o-y to USD 8.7 bn, driven by a 12.4% y-o-y increase in tourist nights to 93.5 mn.#4- Investment income deficit eased: The investment income deficit narrowed 17.2% y-o-y to USD 7.9 bn as investment income payments fell 10.7% to USD 9.2 bn while receipts rose 70.9% to USD 1.3 bn.REMEMBER- Egypt’s current account deficit more than quadrupled to USD 20.8 bn in FY 2023-24, driven by a significant increase in trade deficit and a decline in Suez Canal revenues. The country recorded an overall balance of payments surplus of USD 9.7 bn during the fiscal year, supported by structural reforms introduced during the second half of the year that brought in net inflows of USD 29.9 bn.

Egypt’s current account deficit more than doubled in 1Q FY 2024-2025, reaching USD 5.9 bn compared to USD 2.8 bn recorded during the same period last fiscal year thanks to a sharp increase in the trade deficit and a significant decline in Suez Canal revenues, according to central bank figures (pdf). BoP back in the red: The overall balance of payments recorded a deficit of USD 991.2 mn during the quarter — the balance of payments recorded a surplus of USD 228.8 mn during 1Q FY 23-24. BEHIND THE RISE- #1- Suez Canal earnings took a hit: Revenues from the Suez Canal dropped by 61.2% y-o-y to USD 931.2 mn — net tonnage fell 68.4% y-o-y and the number of transiting ships fell 51.0% y-o-y — with ongoing Red Sea tensions prompting many shipping companies to reroute away from the canal.#2- Oil imports on the rise: Oil imports saw a 85.2% y-o-y rise to record USD 5.4 bn on the back of higher oil and natural gas imports. Exports, meanwhile, fell 25.8% y-o-y to USD 1.2 bn due to lower crude exports. This pushed the oil trade deficit to USD 4.2 bn, up from USD 1.3 bn a year earlier.#3- Non-oil trade deficit widened: Imports of non-oil goods rose by 32.9% y-o-y to USD 17.7 bn, driven by higher spending on key commodities like wheat, soybeans, and pharma products. This increase was slightly offset by a modest increase in non-oil exports, which were up USD 1.2 bn during the quarter to record USD 7.9 bn thanks to exports of fruits, vegetables, aluminum, and cables.EASING THE PRESSURE- #1- FDI inflows on the rise: Foreign direct investment recorded a net inflow of USD 2.7 bn, up from USD 2.3 bn during the same period last fiscal year. Non-oil sectors attracted the bulk of this figure, supported by “selling local entities to non-residents … greenfield investments and capital increases of existing companies … and real estate purchases by non-residents.” #2- Portfolio outflows slowed: Outflows from portfolio investments shrank to USD 384.7 mn compared to USD 523.4 mn last year.#3- Tourism continued its recovery: Revenues from the tourism sector rose 8.2% y-o-y to USD 4.8 bn — the number of tourist nights spent in Egypt saw a 8.2% y-o-y increase to 51.6 mn. #4- Remittances provided relief: Remittances from Egyptians abroad jumped 84.4% y-o-y to USD 8.3 bn as Egyptians abroad have started sending more of their remittances through official channels after the float of the EGP put an end to the parallel market that had pushed remittance flows through unofficial channels. Remember: Egypt’s current account deficit more than quadrupled to USD 20.8 bn in FY 2023-24, driven by a significant increase in trade deficit and a decline in Suez Canal revenues. The country recorded an overall balance of payments surplus of USD 9.7 bn during the fiscal year, supported by structural reforms introduced during the second half of the year that brought in net inflows of USD 29.9 bn.

Egypt’s current account deficit more than quadrupled in FY 2023-24, recording USD 20.8 bn up from USD 4.7 bn during the previous fiscal year, driven by a significant increase in trade deficit and a decline in Suez Canal revenues, according to central bank figures (pdf). (Tap or click the headline above to read this story with all of the links to our background as well as external sources.)On the bright side: Despite the widening current account deficit, Egypt recorded an overall balance of payments surplus of USD 9.7 bn, which the bank said was driven by structural reforms that took place during the second half of the year, which resulted in a net inflow of some USD 29.9 bn.DRIVING THE RISE- #1- Suez Canal revenues dipped: Suez Canal transit receipts saw a 24.3% y-o-y decrease during the year to record USD 6.6 bn — the canal witnessed a 29.6% y-o-y decline in net tonnage and a 22.2% drop in the number of transiting ships. The decline was mostly concentrated in the second half of the fiscal year, which saw revenues dropping by 61.7% to USD 1.8 bn.“Such a decrease is due to the Red Sea maritime traffic disruptions which forced several commercial shipping companies to divert their shipping routes,” the central bank said.#2- Oil exports took a big hit: Oil exports saw a 58.6% y-o-y decrease to USD 5.7 bn, largely driven by a significant dip in our natural gas exports — which fell by USD 6.6 bn to just USD 605.3 mn throughout the year. This meant our oil trade balance stayed in a deficit — it ran a deficit of USD 7.6 bn compared to a surplus of USD 410 mn recorded during the fiscal year 2022-2023. #3- Non-oil trade deficit widened by USD 354.8 mn to USD 31.9 bn thanks to a 2.4% y-o-y increase in non-oil imports. Non-oil exports saw a 4% increase to record USD 26.8 bn. SOFTENING THE BLOW- #1- FDI inflows saw a surge: Foreign direct investment recorded a net inflow of USD 46.1 bn — its highest ever level — up from just USD 10 bn during the previous fiscal year. Inflows were primarily driven by ADQ’s USD 35 bn Ras El Hekma agreement, which contributed the lion’s share of Egypt’s FDI for the year.#2- Portfolio investments in the green: Egypt recorded a net inflow of USD 14.5 bn in portfolio investments, compared to a net outflow of USD 3.8 bn during the FY 2022-23, as March’s float of the EGP and the jumbo interest rate reignited investor confidence in the local economy. #3- Tourism revenues were up: Revenues from tourism increased 5.5% y-o-y, reaching USD 14.4 bn thanks to a 7.4% rise in the number of incoming tourists — which reached 14.9 mn — as well as a 5.5% increase in nights spent.#4- Remittances decreased — but have been recovering since the float: Remittances from Egyptians abroad fell by 0.6% to USD 21.9 bn during last fiscal year, but 4Q FY 2023-24 (following the float) saw a 61.4% y-o-y increase in remittances to USD 7.5 bn. The international press also picked up the story: Reuters.

Egypt’s non-oil trade deficit narrowed by 16% y-o-y to USD 15.9 bn in the first half of 2024, down from USD 18.9 bn during the same period last year, driven by a rise in exports and a dip in imports, Asharq Business reported, citing a government document. (Tap or click the headline above to read this story with all of the links to our background as well as external sources.)EXPORTS-Exports on the rise: Non-oil exports increased by 9.8% y-o-y to some USD 19.6 bn in the first six months of the year, which the news outlet attributed to the float of the EGP in March making Egyptian products more competitive in foreign markets. Construction materials exports contributed the lion’s share: Construction material exports made up nearly a quarter of all non-oil exports in 1H 2024, accounting for 24% of total exports at USD 4.7 bn.Chemical products and fertilizer exports came in second, standing at USD 3.8 bn, representing 19% of total exports. Food industries were close behind in third place, clocking in USD 3.1 bn worth of exports, accounting for 15% of total export receipts. Meanwhile, agricultural exports stood at USD 2.7 bn, making up 14%, followed by engineering products and electronics, which registered USD 2.6 bn in exports.ON THE IMPORTS FRONT-Imports were down: Non-oil imports dipped by 3.3% y-o-y to EGP 35.6 bn. Electronics and engineering goods made up the largest part of our import bill, accounting for 30% of the country’s imports, totaling USD 10.8 bn during the six-month period.We imported much more construction materials than we exported: Construction materials were the second biggest contributor to our import bill, totalling USD 6.8 bn throughout the period and making up 18% of the country’s total imports. Coming in third, fourth, and fifth, were chemical and fertilizer imports at USD 5.1 bn, agricultural imports of USD 4.9 bn, and foodstuff imports that came in at USD 3.9 bn.

Good afternoon, folks. The government’s efforts to slim down the country’s trade deficit seems to be going a lot better than most diets after the first six months of the year.THE BIG STORY TODAY Egypt’s non-oil trade deficit narrowed by 16% y-o-y to USD 15.9 bn in the first half of 2024, down from USD 18.9 bn in the same period last year, Asharq Business, citing a government document. Driving the trend: Non-oil exports increased by 9.8% y-o-y to some USD 19.6 bn in the first six months of the year — pushed by the recent EGP float, which boosted our exports’ competitiveness in foreign markets. As exports increased, non-oil imports dipped by 3.3% y-o-y to EGP 35.6 bn, dragged by a “decrease in imports by about USD 1.2 bn during the first six months of this year,” according to the document cited by the outlet. THE BIG STORY ABROADThe aftermath of Venezuelan President Nicolas Maduro’s re-election continues to make the rounds on the front pages of the int’l business press, with no single business story dominating the news this evening. Protests erupted across Venezuela after President Nicolas Maduro’s disputed re-election, with riot police using tear gas against protesters in Caracas. Maduro was declared the winner of Sunday’s presidential vote by the country’s electoral authority, while the main opposition grouping claimed that its candidate, Edmundo González, had won with 70% of the votes after taking the lead in most polls and exit surveys. (Financial Times | Reuters | CNBC) Get Enterprise daily The roundup of news and trends that move your markets and shape corporate agendas delivered straight to your inbox. Subscribe here ** CATCH UP QUICK on the top stories from today’s EnterpriseAM:It’s a wrap on our third review from the IMF: The Fund’s Executive Board has completed the third review of our USD 8 bn loan program, enabling the Madbouly government to “immediately draw” the USD 820 mn third tranche.The cabinet greenlit the ins and outs of a subsidized loan program for hospitality companies worth up to EGP 50 bn to help support the country reach its tourism targets and reach 25 mn tourists annually by 2028.The agricultural export industry is at war with itself: Egypt’s exports of agricultural goods have seen considerable growth over the past few years. However, a significant portion of Egypt’s exports are traded through a commission-based system also known as consignment — a system that has long been criticized for lowering the sector’s returns.☀️ TOMORROW’S WEATHER- Mercury is peaking at a high of 39°C before simmering to a moderate low of 26°C by night, according to our favorite weather app. Sahel and Alexandria are seeing cooler weather, with a high of 33°C and a low of 24-25°C.

Egypt's current account deficit has widened by 225% y-o-y to USD 17.1 bn in the first nine months of FY 2023-24, up from USD 5.3 bn in the same period in the last fiscal year, according to Enterprise calculations, based on the Central Bank of Egypt figures (pdf).But on the bright side, BoP is in the green: Despite the widening current account deficit, Egypt recorded an overall BoP surplus of USD 4.1 bn during 9M FY 2023-24, a significant increase from the USD 281.9 mn surplus recorded in the same period in the last fiscal year. On a quarterly basis, the balance of payments in the third quarter of the fiscal year was back in a surplus after retracting to a deficit in 2Q FY 2023-24.DRIVING THE SURGE-#1- Our oil trade balance fell back into a deficit: The oil trade balance recorded a USD 5.1 bn deficit, compared to a USD 1.7 bn surplus in the same period a year ago. This was primarily due to a 61% y-o-y drop in oil and gas exports to USD 4.6 bn.#2- Red Sea disruptions are biting into Suez Canal receipts: Suez Canal transit receipts fell 7.4% y-o-y to USD 5.8 bn, with a sharp 57.2% y-o-y drop in the third quarter of the fiscal year after Houthi attacks on vessels passing the waterway started to pick up.#3- Remittances inflows continued to fall until EGP float : Remittances from Egyptians abroad decreased by 17.1% y-o-y to USD 14.5 bn during the nine-month period, but recorded an 11.1% y-o-y jump in the month of March after the central bank floated the currency near to the beginning of the month.SOFTENING THE BLOW-#1- FDI inflows jump towards the end of the nine-month period: Net FDI inflows tripled y-o-y to USD 23.7 bn, up from USD 7.9 bn in the same period a year prior. The lion’s share of the inflows came in the third quarter of the fiscal year, with USD 18.2 bn in FDI being recorded — USD 15 bn of which was from the first payment from the Ras El Hekma agreement.#2- Portfolio investments reverse course: Egypt recorded a net inflow of USD 14.6 bn in portfolio investments in 9M FY 2024-25, compared to a net outflow of USD 3.4 bn in the previous year, signaling renewed investor confidence at the end of nine-month period after the float in March and the deal with the IMF.#3- Tourism revenues continue to grow: Tourism revenues increased by 5.3% y-o-y to USD 10.9 bn, up from USD 10.3 bn, driven by higher tourist arrivals and nights spent.#4- Non-oil trade deficit narrows: The non-oil trade deficit improved by USD 1.5 bn to USD 23.7 bn, thanks to a 2.9% drop in non-oil imports and a 1.1% rise in non-oil exports.

Egypt’s current account position has weakened over 441% y-o-y to USD 9.6 bn in 1H FY2023-24, from USD 1.8 bn recorded the same period last year, according to Enterprise calculations based on central bank figures (pdf).BoP back in the red: Egypt recorded a BoP deficit of USD 410 mn during the first half of the current fiscal year, in comparison to a surplus of USD 599 mn during the same period in the previous fiscal year. On a quarterly basis, the balance of payments in 2Q FY 2023-24 was back in a deficit after two consecutive quarters of recording a surplus.DRIVING THE DECLINE-#1- Exports fall: Exports weakened nearly 24% y-o-y in 1H FY 2023-24 to USD 16.4 bn, driven by a 63% y-o-y dip in oil exports, which recorded USD 3.2 bn for the period. This resulted in the trade deficit widening 21% y-o-y to USD 18.7 bn. #2- Remittances on the decline: Remittances from Egyptians abroad fell 21% y-o-y to USD 9.4 bn during the period between July and December 2023.#3- Less FDI: Foreign direct investment came in at USD 5.5 bn during the period, down from USD 5.7 bn during the same period in the previous fiscal year.SOFTENING THE BLOW-#1- Tourism revenues saw a 6% y-o-y rise to USD 7.8 bn during 1H, driven by an increase in both tourist nights and arrivals. Egypt received 7.8 mn tourists during the period, up almost 15% y-o-y.#2- Portfolio inflows jump: Investors reversed course and have once again started pouring capital into Egypt, with the country recording USD 253 mn of net portfolio inflows during the half, in comparison to outflows of USD 3 bn recorded during the same period last year.#3- Despite the disruptions in the Red Sea, Suez Canal receipts were up 21% y-o-y to USD 4.8 bn. #4- Imports dip: Imports fell over 5% y-o-y to USD 35.1 bn thanks to a dip in oil and non-oil imports.

Egypt’s current account deficit narrowed in 1Q FY 2023-2024 thanks to an increase inSuez Canal and tourism revenues, according to central bank figures (pdf). The current account deficit narrowed almost 12% y-o-y to USD 2.8 bn, down from USD 3.2 bn during the same period last year. The balance of payments recorded a surplus of almost USD 229 mn in 1Q 2023-2024, less than half of the USD 523.5 mn recorded during the same period last year.This is our second quarter in the green: This is our second quarterly BoP surplus in a rowand our third quarterly surplus since 2014, after we broke the deficit streak in 2Q of last year.The breakdown: #1- A dip in exports: Exports weakened nearly 20% y-o-y to USD 8.3 bn, triggered by oilexports more than halving during the quarter to USD 1.6 bn “on the back of the decrease in the exports of natural gas … and oil products … due to the decline of the exported quantities and the global prices.” Meanwhile, non-oil exports inched higher to USD 6.7 bn from USD 6.3 bn the year before. #2- Remittances declined yet again: Remittancescontinued to fall, hitting their lowest levelsince FY 2016-17 amid the continued currency uncertainty. Remittances to Egypt recorded USD 4.5 bn for the quarter — a near 30% drop from last year’s USD 6.4 bn.#3- FDI also saw a sizable drop: Foreign direct investments came in at USD 2.3 bn, down from last year’s USD 3.3 bn. The figure was marginally higher from the USD 2.1 bn figure recorded in 4Q FY 2022-2023. Helping cushion the losses:#1- Imports continued to decline: Imports fell for the sixth consecutive quarter to hit USD 16.3bn from USD 19.1 bn in 1Q 2022-2023, as both oil (24% y-o-y) — thanks to dip in crude oil imports triggered by rising global prices — and non-oil (13% y-o-y) — thanks to a dip in the imports of corn, organic and inorganic compounds — imports fell. This resulted in the trade deficit narrowing to USD 7.9 bn from USD 9.1 bn a year ago.#2- Tourism revenues rose 9% y-o-yto USD 4.5 bn, driven by an increase in both touristnights and arrivals.#3- Transport receipts also grew over 13% y-o-y to USD 3.5 bn, driven by an increase inSuez Canal transit receipts — which were up 19% y-o-y during the period — thanks to a jump in both the net tonnage of vessels passing and the number of vessels passing by. #4- Portfolio flows: Investors continued to pull capital from financial assets, but at a much slower pace. Egypt recorded some USD 523 mn of net portfolio outflows during the quarter compared to USD 2.2 bn in the same quarter last year.

And Fitch makes three: Fitch Ratings followed in the footsteps of S&P Global Ratings and Moody’s in downgrading our sovereign credit rating deeper into junk on Friday, voicing concerns about our debt sustainability. In a statement Friday, Fitch said it had cut our credit rating to B- from B due to “increased risks to external financing, macroeconomic stability and the trajectory of already-high government debt” in addition to slow reform progress and FX constraints.Things could improve in the months ahead: Fitch revised its outlook to stable from negative on the expectation that the government will accelerate reforms — including on the exchange rate, privatization and reduced infrastructure spending — after the presidential election in December. This will “likely pave the way for a new and potentially larger IMF program and additional support from the GCC.”Currency uncertainty: “The Central Bank of Egypt's (CBE) ability to restore exchange rate and monetary credibility is uncertain,” Fitch said. “Floating the EGP, without rebuilding confidence and FX availability in the official market, may be associated with significant overshooting of interest rates and inflation … Delays in adjustment aggravate these risks, in our view.”We’ve got a lot of debt due this year and the next — and it’ll probably get more expensive to service — and our financing options are limited, noting that we are “increasingly reliant on FDI” to cover our current account deficit.FinMin reax: “The Egyptian economy is still capable of facing challenges and providing external financing needs,” Finance Minister Mohamed Maait said yesterday. Maait highlighted that we can access USD 5 bn annually from international development banks with easy terms and argued that this reflects the confidence of these institutions in the country’s economic trajectory. Egypt has identified sources for external financing of USD 4 bn until the end of FY 23-24, Maait added, including a recent CNY-bond issuance and a JPY-denominated offer that was completed on Thursday.The international press also had the story: Reuters | Bloomberg.

Egypt’s current account deficit narrowed by 40% y-o-y to USD 3.5 bn in 3Q 2022-2023 on the back of falling imports, according to Enterprise calculations of central bank figures (pdf) released yesterday. The deficit came in at USD 3.5 bn during the January-March quarter, down from USD 5.8 bn in the same period last year and compared to a USD 1.4 bn surplus in 2Q, the country’s first since 2014. On a nine-month basis, the current deficit narrowed more than 60% to USD 5.3 bn from USD 13.6 bn last year. Thank the import squeeze: The value of imports fell 25% y-o-y during 3Q, helping to narrow the trade deficit despite a decline in exports. The country spent USD 17.5 bn on imports during the three-month period, down from USD 23.6 bn in the same period last year, as the ongoing shortage of hard currency constrained importers’ ability to pay for overseas goods. This caused the trade deficit to narrow more than 30% to USD 8.1 bn, offsetting an 18% fall in exports, which came in at USD 9.6 bn. It’s likely that falling oil and gas sales helped depress exports: Oil and gas exports fell almost 40% y-o-y to USD 3.2 bn during the quarter. Non-oil exports declined at a slower rate, bringing in USD 6.4 bn compared to USD 6.6 bn in the same period last year. Tourism and Suez Canal revenues also rose: Tourism revenues rose 25% y-o-y to USD 3 bn during the quarter from USD 2.4 bn last year, which the central bank attributed to a “rise in the numbers of both tourist nights and tourist arrivals.” Meanwhile, Suez Canal revenues saw a 29% increase to USD 2.2 bn from USD 1.7 bn a year prior thanks to an increase in the net tonnage of vessels passing by. On a less positive note- FDI and remittances also fell during the quarter, and there were further portfolio outflows: FDI: Net foreign direct investment almost halved y-o-y, falling to USD 2.2 bn from USD 4.1 bn. Remittances: Incoming transfers from Egyptian expats fell more than 30% y-o-y to USD 5.5 bn. Portfolio flows: Investors pulled USD 400 mn from the country during the three-month period, down from USD 14.8 bn a year earlier.

Egypt generated a current account surplus for the first time since 2014 in 2Q FY 2022-2023 due primarily to falling imports, according to Enterprise calculations based on central bank figures (pdf) released Wednesday. The current account turned to a USD 1.41 bn surplus during the October-December period, compared to deficits of USD 3.8 bn in the same period a year earlier and USD 3.19 bn the previous quarter.KEY DRIVERS OF THE IMPROVEMENT- #1- Falling imports: Egypt’s trade deficit recorded its smallest deficit in 12 years in 2Q FY 2022-2023, narrowing to USD 6.45 bn from USD 10.64 bn a year earlier and USD 9.1 bn in 1Q. This was driven by a 20% decline in imports, which fell to USD 17.99 bn from USD 22.48 bn a year earlier, primarily due to the import restrictions imposed last year in response to the FX shortage. Meanwhile, the country exported USD 11.54 bn worth of goods during the quarter, down 3% y-o-y but up from almost USD 10 bn in the previous quarter.#2- Tourism rebound continues:Tourism revenues rose 9% y-o-y to USD 3.25 bn, compared to USD 2.98 bn in 2Q FY 2021-2022, but fell more than a third from the previous quarter. Expect the rebound to have continued in the January-March quarter: arrivals reportedly rose 33% y-o-y during the first four months of the year, putting the government on track to meet its target of 15 mn visitors in 2023.#3- Suez Canal revenues up:Suez Canal receipts rose 17% to USD 1.97 bn, up from USD USD 1.7 bn a year earlier. Revenues were down slightly from USD 2 bn from 1Q.#4- Rising FDI: Foreign direct investment climbed 52% to USD 2.43 bn, from USD 1.6 bn a year earlier. Inflows fell 26% on a quarterly basis from USD 3.3 bn in 1Q.TO THE DOWNSIDE-#1- Portfolio outflows continue: The country clocked net portfolio outflows of USD 855.4 mn during the quarter as investors continued to pull money out of the country amid the economic uncertainty. The upside: Outflows eased markedly from USD 6 bn a year earlier during the height of the global economic shock caused by Russia’s war in Ukraine. #2- Remittances fell: Remittances from Egyptians abroad fell 25% y-o-y to USD 5.56 bn. They also fell 14% from 1Q when they registered USD 6.44 bn. The story received international coverage:Reuters.

Fitch Ratings has downgraded Egypt’s sovereign credit rating for the first time since 2013, cutting it one level to B from B+ and maintaining its negative outlook. The downgrade comes on the back of “high external financing requirements, constrained external financing conditions and the sensitivity of Egypt's broader financing plan to investor sentiment,” the ratings agency said on Friday. The Big Three are feeling downbeat: Fitch Ratings’ decision comes a few months after a similar move by Moody’s which in February cut Egypt’s rating to B3, and two weeks after S&P Global Ratings downgraded its outlook to negative.The rationale: Uncertainty about our ability to secure external funding. Limited access to debt markets and weak foreign currency inflows — largely due to a lack of investor confidence in our exchange rate regime — are weighing on the country’s ability to meet its needs for external financing. “We see a risk that a further delayed transition to a flexible exchange rate will further undermine confidence, and, potentially, delay the IMF program,” Fitch wrote, noting that it had detected a “marked deterioration” in the country’s public debt indicators which will “put medium-term debt sustainability at risk” if not reversed.The FX market is key: Investors are reluctant to participate in the foreign exchange market due to “high uncertainty [regarding] the future exchange rate level [and] interventions by public sector banks,” the report said. The USD-EGP exchange rate has remained unchanged since mid-March following three devaluations that have caused the EGP to more than halve in value against the greenback. Fitch “assumes that the exchange rate will depreciate further before stabilizing in the financial year ending June 2024.”How much external financing do we need? The government seeks to drum up some USD 10 bn annually in FDI starting in the current fiscal year — in addition to an unspecified amount of portfolio inflows — to cover the current account deficit. Around USD 7.2 bn worth of external government debt will mature in FY 2023-2024 — up from USD 4.3 bn this year — exerting further pressure on our external financing needs, according to Fitch.Gulf inflows key: “We continue to believe GCC support to Egypt's economy is strong, and successful divestment deals with Gulf partners would help restore confidence and unlock further investments,” Fitch wrote. REMEMBER- Egypt’s attempts to sell state assets to Saudi Arabia, the UAE and Qatar have stalled in recent weeks amid uncertainty about both the exchange-rate and progress on economic reform. The three Gulf states last year pledged to provide more than USD 20 bn in investment and funding for Egypt to help shore up the country’s FX reserves following the economic shock triggered by the war in Ukraine.More from Fitch:Inflation will average 24% this fiscal year before steadily declining to 18% in FY 2023-2024, in part due to a favorable base effect;Debt-to-GDPwill climb to 96.7% this year from 86.6% in FY 2021-2022, before falling to 87.3% next year, partly thanks to negative real interest rates;Economic growth will slow to 4.0% in FY 2022-2023 from 6.6% last year before bouncing back to 4.5% next year;The current account deficit will narrow to 3.3% of GDP (USD 12 bn) this fiscal year and the next, down from 3.5% (USD 16 bn) in FY 2021-2022, thanks largely to rising tourism and Suez Canal revenues.The news got ink internationally:Bloomberg | AFP | The National | Dow Jones.

Current account deficit narrows, FDI more than doubles in 1Q2019-2020: The current account deficit decreased 31% y-oy in the first quarter of the government’s new fiscal year to USD 1.382 bn from USD 2.012 bn the previous year, according to a central bank report (pdf). The non-oil trade deficit also narrowed to USD 8.177 bn from USD 9.207 bn during the quarter, with non-oil exports rising 17% y-o-y. Balance of payments (BoP) generated a surplus of USD 227.3 mn, down from USD 284.1 mn in 1Q2018-2019. FDI rises after lagging for years: Meanwhile, net foreign direct investment (FDI) jumped 67.7% y-o-y during the quarter to USD 2.35 bn from USD 1.415 bn. “The jump ‘was led by higher non-oil investments … a long awaited development, which is also a key performance indicator post-implementation of the tough economic reforms,” said Naeem Brokerage’s Allen Sandeep, according to Reuters. The narrowed current account deficit and rising FDI have helped the EGP rallying in recent weeks, Sandeep said. The EGP is up more than 10% against the greenback in 2019, Reuters notes. The USD was trading hands at EGP 15.99 yesterday. Tourism revenues rose to USD 4.194 bn during the quarter from USD 3.931 bn in 1Q2018-2019, marking a “significant” increase that could lead to “another record year” if revenues remain on an upwards trajectory, Sandeep said. Remittances also grew to USD 6.713 bn from USD 5.909 bn, while revenues from the Suez Canal inched up marginally to USD 1.507 bn from USD 1.441 bn.

Is Egypt seeking a standby credit facility from the IMF? Egypt’s post-loan agreement with the IMF is could take the form of a standby credit facility, which “provides financial assistance to low-income countries … with short-term balance of payments needs,” unnamed government sources tell the local press. The facility’s duration is expected to be two years, which the fund says should be the maximum amount of time needed to resolve a country’s financing needs in order to be eligible for the facility. According to the sources, the government is hoping to have the agreement signed by 1Q2020, which is consistent with recent statements that the agreement could be finalized as early as March. Background: The Finance Ministry had previously said that Egypt is eyeing a non-loan agreement with the IMF following the expiry of the USD 12 bn Extended Fund Facility, and initially said we could sign said agreement by October. IMF officials had initially poured cold water on the prospect of a cooperation framework, saying that Egypt would have to complete its three-year program with the fund before trying to get a second helping. The IMF’s Middle East and Central Asia Director Jihad Azour said in October that any renewed engagement between Egypt and the fund would likely focus on developing the private sector, strengthening welfare provisions, and increasing the transparency of state organizations.

Egypt’s current account deficit widened to USD 8.2 bn in FY 2018-2019, up from USD 6 bn the previous year, according to central bank figures (pdf). Rising imports and a dip in remittances caused the current account to fall further into the red, despite the oil balance turning a surplus and a pick up in tourism revenues. The balance of payments (BOP) recorded an overall deficit of USD 102 mn against a USD 12.8 bn surplus the year before. BOP figures have slowly recovered over the second half of the year after sinking to a USD 1.77 bn deficit during 1H 2018-2019. Reuters has the breakdown by quarter.The good news first: The oil trade balance recorded a surplus of USD 8.1 mn compared to a deficit of USD 3.7 bn the year before as “a result of the leap in investments in the oil and gas sector,” the CBE said. Oil exports rose to USD 11.6 bn last fiscal year, up from USD 8.7 bn the year before, as imports fell by 7.6% to USD 11.5 bn from USD 12.5 bn. Egypt halted all imports of natural gas in the second quarter of FY 2018-2019 and gradually lowered reliance on imported oil products and crude. The non-oil trade balance wasn’t as hot: The deficit widened by 13.4% to USD 38 bn, driven both by a fall in exports and a rise in imports, which the CBE said was partly due to a pick up in economic activity. Tourism revenues surged to USD 12.6 bn from USD 9.8 bn in 2017-2018. FDI and portfolio investment fell in FY 2018-2019: Net foreign direct investment fell to USD 5.9 bn from USD 7.7 bn the year before, while net inflows of portfolio investment declined to USD 4.2 bn from USD 12 bn.Expat remittances slipped to USD 25 bn from USD 26 bn during the year, in a drop that Pharos Holding’s Radwa El Swaify described as “insignificant.”

We may be close to finishing the IMF program, but our trade balance isn’t looking much better: Egypt’s current account deficit will continue to widen over the coming quarters as the country’s trade balance deteriorates, Fitch Solutions says in a new report. The report forecasts the deficit increasing to 2.8% of GDP in FY2019-2020 from 2.5% last year due to stalling export growth and rising imports. The current account deficit narrowed significantly between 2016 and 2018 as remittances increased and tourism revenues recovered. However over the past year it has widened rapidly, increasing from USD 493 mn in 4Q2017-2018 to USD 3.75 bn in 3Q2018-2019. Oil and gas production growth won’t continue at its current rate: Fitch’s oil and gas team expect production growth to fall sharply in 2020 to 6.6% from 16.4% in 2019. This isn’t great news considering the centrality of hydrocarbons to exports over the past few years, and attract the bulk of the country’s FDI. Fitch sees the EGP continuing to strengthen during 2H2019, placing extra pressure on non-oil exports which grew at a meager 0.3% y-o-y in 1Q2019. The EGP has continued to gain against the greenback in 2019, rising more than 9% since the start of the year. We’re lessening our dependency on imported fuel, but this is “far from enough.” Booming domestic gas production and the fuel subsidy cuts have reduced the fuel bill, but reliance on other imported goods means that this will have only a limited impact on the trade deficit. Fitch expects import growth to remain “relatively strong” in the short term, given the long-term process of improving domestic supply. Tourism and remittance inflows will continue to increase in the coming quarters, helping to mitigate the effects of the poor trade balance. Stronger GDP growth in the Gulf will provide a boost to remittances, while tourism will continue its recovery albeit with a slower revenue growth. Anemic FDI means plenty of debt financing is still on the menu: Net FDI inflows have barely moved since the government began its economic reform program two-and-a-half years ago, and remain small. Non-oil inflows fell to five-year lows of USD 400 mn in 1Q2019. “We expect [current account] shortfalls will continue to be funded by debt, given that foreign companies still seem too unsure about Egypt’s reform trajectory to commit money as direct investments,” Fitch says.

Current account deficit almost doubles in 3Q2018-2019 as non-oil imports rise: The current account deficit almost doubled during 3Q2018-2019 to USD 3.75 bn from USD 1.93 bn the previous year due to a rise in non-oil imports, Reuters reported, citing its own calculations based on central bank data (pdf). The deficit increased 38% to USD 7.6 bn during 9M2018-2019, up from USD 5.5 bn during the same period a year earlier, primarily caused by an 11% rise in non-oil imports to USD 41.8 bn. Balance of payments (BoP) generated a USD 1.4 bn surplus in 3Q but recorded a USD 351.2 mn deficit over the first nine months of the year, thanks to the USD 1.77 bn deficit during 1H2018-2019.Egypt’s non-oil FDI falls to lowest level since 2014: Egypt’s non-oil foreign direct investment (FDI) fell to USD 400 mn in 1Q2019, down from USD 720 mn in 1Q2018, according to Reuters calculations. This is the lowest level recorded since 2014. High interest rates, low consumer demand, and the slow rate of privatization are all affecting Egypt’s ability to attract more FDI, economists said. These findings should not come as a surprise: Economists told us in April that FDI was always going to take time to recover after the devaluation of the currency in late 2016. EFG Hermes’ Mohamed Abu Basha said that it is “unrealistic” to expect a post-float spike in FDI given the pressure exerted on the economy by the government’s economic reforms. Naeem Brokerage’s Allen Sandeep, meanwhile, predicted that we would need to wait until the reform program is 5-10 years old before seeing a recovery in FDI. Tourism revenues surged to USD 9.4 bn in 9M2018-2019, up from USD 7.3 bn the year before. Other key data points (9M2018-2019): Remittances dipped slightly to USD 18.2 bn from USD 19.4 bn;Suez Canal receipts rose by 2.8% y-o-y to USD 4.3 bn, up from USD 4.2 bn;Non-oil exports declined by 3.1% y-o-y to USD 12.4 bn, from USD 12.8 bn, mainly due to falling gold exports.

Welcome back, ladies and gentlemen — it’s a busy start to what’s likely to be a busy week. We have June’s inflation data coming out in the next few days, and on Thursday, 11 July, the central bank’s Monetary Policy Committee will meet to review key interest rates. The consensus among our poll of economists (which you’ll find in this morning’s Speed Round, below) is that the central bank will leave rates on hold for another month as it assesses the inflationary impact of the fuel subsidy cuts. Speaking of which: Your commute is officially more expensive. Fuel prices rose between 16% and 30% over the weekend as the government pushed ahead with the latest round of subsidy cuts. We have chapter and verse in this morning’s Speed Round, below. New fiscal data was also released over the weekend — and it doesn’t make great reading. Rising imports caused the current account deficit to almost double year-on-year in the first nine months of FY2018-19, while the balance of payments swung from enjoying an USD 11 bn surplus to turning a deficit of USD 350 mn over the same period. The full breakdown is also in Speed Round, below. President Abdel Fattah El Sisi is in Niger today to attend an extraordinary African Union summit. The gathering will see the launch of the operational phase of the African Continental Trade Agreement (AfCFTA), which came into force on 30 May. We have more on this in Last Night’s Talk Shows, below. The House of Representatives is scheduled to end its current legislative session and recess for the summer this week, unidentified sources told reporters yesterday, according to Ahram Online. Our esteemed representatives have a few more bills to get through before rushing to the beach, including a draft law to regulate the Bar Association and amendments the “old rent” law, among others. By law, President Abdel Fattah El Sisi must call in the first session of the House by the first Thursday of October. The next legislative season will be the last before new representatives are elected to parliament. A World Bank delegation will visit several industrial zones in Qena on Tuesday, 9 July, according to Youm7. Well, we’re officially out of Afcon: Our African Cup of Nations run was, sadly, cut short yesterday by South Africa, which netted an 85th-minute lead past Mohamed El Shennawy (even his sizeable hands couldn’t save us). Yesterday’s match result was not all that surprising, but it managed to set off a domino effect of chaos in Egypt’s football scene.Egyptian Football Association (EFA) President Hany Abo Rida resigned from his post following the defeat, but will continue to lead the committee in charge of organizing Afcon until the tournament wraps up, the EFA said in an overnight statement. He also sacked the national team’s entire coaching staff, saying that “the decision is an ethical obligation.” Senior officials told Egypt Today following Abo Rida’s departure that authorities will launch an investigation into the EFA’s suspected “administrative and financial violations,” which allegedly had a direct correlation with the loss. Abou Rida has been at the helm of the association since August 2016. EFA board members Hazem Emam and Seif Zaher also announced their resignation shortly after Abo Rida’s, alongside Ahmed Megahed and Essam Abdel Fattah. Strong US jobs report dampens expectations for deep Fed rate cut: US jobs growth surged in June, beating out economists’ predictions and shortening the odds of a deep rate cut by the US Federal Reserve later this month, the FT reports. Nonfarm payrolls tripled to 224k last month from the 72k added in May, making June the best month of 2019 for job growth. The positive data lessens the pressure on the Fed to make a deep rate cut when it meets on 30-31 July, and increases the possibility that officials will instead opt for a minor 25 bps cut. Wall Street didn’t see the positives: The three main US indices closed in the red on Friday, with the Dow down 0.16%, the S&P 500 shedding 0.18% and the Nasdaq losing 0.10%. The yield on US 10-years meanwhile moved back above 2% on the news. The market is getting “carried away” with expectations for multiple Fed rate cuts- El Erian: Market predictions for several rate cuts by the US Federal Reserve this year are unrealistic, market guru Mohamed El Erian told CNBC’s ‘The Exchange’ on Friday (watch, runtime: 3:09). “We as the market base have gotten carried away, carried away thinking it will be 50 bps in July, thinking we’re going to get three cuts by the end of the year,” he said. “We’re going to get one in July and maybe, maybe two, and that’s about it.” El Erian predicts that the Fed will make a 25 bps cut when it meets this month, instead of a deeper 50 bps cut recently forecast by many market watchers. Do we finally have a truce in Sudan? Military and protest leaders in Sudan agreed on Friday to share power in a joint military-civilian council tasked with seeing the country through a three-year transitional period before elections in 2022, the Wall Street Journal reports. The truce could mark an end to months of protests and violence for our southern neighbor, which led to the ouster of long-time President Omar Bashir in April. In international miscellany: Erdogan decided to fire Turkey’s central bank governor, complaining that the country’s high interest rates are hurting the economy, according to the Financial Times.Has Qatar’s massive construction boom run its course? A USD 200 bn infrastructure push in preparation for the 2022 World Cup has transformed the Gulf state over the past decade, but the news that construction shrank 1.2% in 1Q2019 (compared to almost 23% growth in the same period a year earlier) shows that the country must now find a new source of economic growth, Bloomberg reports. Folding phones aren’t dead, Samsung insists: Two months after its Galaxy Fold disaster, Samsung is planning a relaunch in a bid to resuscitate its ambitions to become a global leader in the still-gimmicky folding phone market. The FT has more. PSA- Calling all prospective MBA students: Stanford Business School is holding an information session at AUC’s Tahrir Square campus on Wednesday, 10 July at 7 pm. The session is a chance for prospective students to get an overview of the MBA program at Stanford and have their questions answered.

Egypt’s current account deficit narrowed marginally to USD 1.751 bn in 1QFY18-19, down from USD 1.754 bn during the same period last year, according to a CBE report (pdf). The balance of payments recorded a surplus of USD 248.1 mn, down from USD 5.1 bn in 1QFY17-18, while the trade deficit rose to USD 9.9 bn from USD 8.91 bn a year ago. Net foreign direct investment dropped to USD 1.1 bn in 1Q2017-18, down from USD 1.84 bn during the same period last year. Investment in oil and real estate accounted for the lion’s share of FDI. Portfolio investment generated net outflows of USD 3.2 bn, down from USD 7.5 bn a year ago. Merchandise exports grew 16.2% to USD 6.8 bn, thanks to a 57.6% rise in oil exports to USD 2.8 bn, bolstered by higher volumes and higher global crude prices. Non-oil exports dropped 2% y-o-y to USD 4, down from USD 4.1, mainly as a result of lower exports of semi-finished goods, particularly gold. Imports climbed 13% to USD 16.68 bn. Remittances also grew marginally to USD 5.91 bn, up from USD 5.82 bn a year earlier. According to Reuters, the CBE seems to have revised its remittances figure for last year, which it previously said had reached USD 5.97 bn during the comparable quarter. Travel receipts recorded a surplus of USD 3.2 bn, up from USD 2.0 bn, while revenues from the Suez Canal grew by 4.3% y-o-y to USD 1.44 bn.