Cairo: Egypt’s financial dealings with the outside world turned positive last fiscal year after an influx of foreign investment following the flotation of the pound in November.
The North African nation recorded a balance of payments surplus of $13.7 billion in the year ending June 30, compared with a $2.8 billion deficit a year earlier, the central bank said in a statement on its website. Egypt saw about $16 billion of net investments in its debt and equities last year, versus an outflow of about $1.3 billion in the previous 12 months, the regulator said.
Egypt removed most restrictions on its currency in November in a bid to end a foreign-exchange crisis that crippled economic growth, paving the way to a $12 billion International Monetary Fund loan. Foreign reserves have grown to over $36 billion, a record, as the government increased borrowing from international financial institutions and friendly nations.
“Despite the improvement, I would not say the economy has turned a corner yet,” said Hany Farahat, senior economist at Cairo-based CI Capital. “More needs to be done to ensure such short-term gains are sustainable, especially if the Egyptian pound gains some value in the coming months.”
The current-account deficit, which includes trade in goods and services as well as financial transfers, narrowed 22 per cent to $15.6 billion. The trade deficit narrowed 8.4 per cent, or about $3.3 billion, to $35.4 billion as oil exports rose by $1.9 billion. Proceeds from non-oil exports rose 16 per cent thanks to the “improvement of the competitiveness” after the pound lost about half of its value since the flotation, the central bank said.
Despite the improvement in competitiveness, the weaker pound, along with lower subsidies and an increase in value-added taxation, has propelled inflation to more than 30 per cent, squeezing households in a country where about half of the population lives below or near the poverty line.