Egypt’s current account deficit narrows to $1.6 billion

CAIRO: Egypt’s current account deficit narrowed to $1.6 billion in the first quarter of the 2017-18 financial year from a deficit of $4.8 billion in the same period a year earlier, the central bank said in a statement on Sunday.

The overall balance of payments surplus was $5.1 billion compared to $1.9 billion in the same period a year earlier, the statement said.

Egypt’s economy has been struggling since a 2011 uprising drove tourists and foreign investors away, but a $12 billion International Monetary Fund deal signed last year is hoped to put the country back on track.

The trade deficit narrowed by 5 per cent, reaching $8.9 billion from $9.4 billion the previous year due to a rise in exports, the statement said.

Oil exports rose by 16.8 per cent while non-oil exports by 8.6 per cent.

“Net inflows of FDI (foreign direct investment) in Egypt registered $1.6 billion, as a direct result of the 84.2 per cent rise in the net inflow for oil sector investments,” the statement said.

Portfolio investment net inflows rose to $7.5 billion against a net outflow of $840.9 million the previous year, due to a hike in foreign investment in Egyptian debt.

Egypt’s central bank has raised key interest rates by 700 basis points since it floated the pound currency last year, generating appetite for Egypt’s debt. Egypt’s inflation fell to a 2017 low in November, a year after the country floated its pound currency as part of a $12 billion International Monetary Fund (IMF) deal to boost the economy.

Inflation shot up after the pound’s flotation last November, reaching a record high in July following cuts to energy subsidies, but has gradually eased since.

Consumer price inflation

Annual urban consumer price inflation eased to 26 per cent in November from 30.8 per cent the previous month, official data showed on Sunday.

Core inflation, which strips out volatile items such as food, fell to 25.53 per cent from 30.53 per cent.

“Inflation data shows inflationary pressures from reforms have tapered off and the existing pressures are from seasonal and one-off factors reflecting below average, but somewhat resilient, consumer demand,” said Reham El Desoki, senior economist at Arqaam Capital.

“We believe a cut when headline inflation breaks the 20 per cent (mark) is more likely in early February 2018, and suitable, than one where inflation is still at 26 per cent,” Desoki added.

Egypt’s finance minister said on Sunday that he expected January inflation to reach 20 per cent and for the rate to drop to 13-14 per cent by next August.

Egypt’s economy has been struggling since a 2011 uprising drove away foreign investors and tourists, two main sources of hard currency, but the IMF deal is intended to put the country back on track. -