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Egypt's Q3 current account surplus boosted by foreign transfers

Billions of dollars worth of foreign transfers helped Egypt post a current account surplus between January and March

Published: Updated:

Billions of dollars worth of foreign transfers helped Egypt post a current account surplus between January and March, and investor hopes of greater political stability ahead also contributed to a narrowing of Egypt's gaping deficits.

Reuters calculations showed a current account surplus of $523.1 million in the three month period, driven by a rise in remittances and other transfers from abroad, including aid.

Between July and March Egypt posted a current account deficit of $232.7 million, its central bank said on Wednesday, a massive reduction from a deficit of $5.7 billion a year earlier. Egypt's fiscal year starts on July 1.

Arab Gulf countries have supported Egypt with aid worth billions of dollars in the form of financial support and oil products since former army chief Abdel Fattah al-Sisi deposed Islamist President Mohamed Mursi after mass protests last July.

Sisi was sworn in as Egypt's new president this week.

The central bank said transfers had increased to $23.6 billion over the first nine months of the financial year, from $14.4 billion at the same point a year before, "supported mainly by the rise in net official transfers (commodity and cash)".

Official transfers rose to $4.5 billion in the third quarter of the fiscal year from only $10 million a year earlier.

Gulf Arab states do not regularly issue details of the size and timing of their aid payments, however Saudi Arabia, Kuwait and the United Arab Emirates have pledged more than $12 billion aid to Egypt since July.

Mohamed Abou Basha, economist at investment bank EFG-Hermes, said he believed the third quarter surplus was mainly due to grants from Gulf Arab states.

"It is the same trend that we have seen over the last three quarters where fundamentally you have a weak balance of payment, energy balance in the negative, low growth in remittances but the external balances are supported by grants from the Gulf."

Egypt spent around $3.8 billion on oil imports between January and March, almost $1 billion more than last year. Its revenues from oil exports declined to $2.7 billion from just over $3 billion in the same period.

Imports Up

The trade deficit in the third quarter of the fiscal year widened to $9.7 billion from around $7 billion, with imports increasing almost 20 percent to around $16 billion.

Egypt is the world's biggest wheat importer and supplies its citizens with heavily subsidies bread and energy products that have traditionally eaten up around a quarter of its budget.

The trade deficit declined by 1.5 percent to $25.2 billion in the nine months to March compared with a year earlier, as a 4.2 percent rise in merchandise exports - to around $18.8 billion - outpaced the 0.8 percent rise in merchandise imports.

Foreign direct investment (FDI) in Egypt rose to $4.7 billion in the first nine months compared with $3.6 billion in the same period a year earlier, driven by inflow in the oil sector. FDI in the third quarter of 2014 alone rose 71-percent from the same period the previous year to $1.8 billion.

Investors have cited Egypt's political transition, including a constitutional referendum and presidential elections in the first half of this year, as a positive indicator after years of turmoil that followed a 2011 revolt that toppled Hosni Mubarak.

Tourism revenue took a hit in the third quarter falling almost $1 billion to $1.6 billion.

In a rare attack on tourists, militants blew up a coach carrying Korean holidaymakers in February, killing three. The attack triggered international travel warnings against parts of Egypt.

All quarterly figures are Reuters calculations based on central bank figures. The central bank provided figures for the period between July and March.