Egypt's current account deficit narrows to $2.4b

CAIRO — Egypt's current account deficit shrank to $2.4 billion in the 2013-14 fiscal year from $6.4 billion the previous year, boosted by billions of dollars in aid from Gulf Arab donors, the central bank said on Thursday.

The year in question began with former army chief Abdel Fattah Al Sisi's overthrow of president Mohamed Morsi and the worst violence in Egypt's modern history, followed by an influx of financial support from Arab Gulf states that backed Sisi's move.

Those 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 2013 — roughly the same as the net official transfers figure released by the central bank on Thursday.

The bank also said that improvement in the current account was driven by a rise in remittances and other payments from abroad, including aid. Net official transfers increased by more than tenfold to $11.9 billion in the fiscal year that ended in June from $835.6 million the previous fiscal year.

However, Egypt still posted a current account deficit of $2.123 billion between April and the end of June — the fourth quarter of the fiscal year — according to Reuters calculations.

This came after it registered a surplus of $523.1 in the third quarter, between January and March. The marked difference appeared linked to the timing of official transfers — most likely the receipt of foreign aid from Egypt's Gulf allies.

In the third quarter, official transfers were $4.5 billion, compared to just $1.4 billion in the fourth quarter, according to Reuters calculations.

Sisi took office as president in June and pledged to combat terrorism, improve the economy and restore stability after three years of upheaval, which began when a popular uprising ended three decades of iron-fisted rule by Hosni Mubarak.

According to Mohammed Abu Basha, economist at investment bank EFG-Hermes, the figures show Egypt's finances are still precarious.

"From a macro standpoint, things were not really that solid, if you look at tourism and exports. It's the foreign flows that helped restore macro stability and support the currency," he said.

The central bank said the improvement might have been larger without a sharp decline in tourism revenues. They fell 48 per cent to $5.1 billion from $9.8 billion a year earlier.

The trade deficit grew by 9.8 per cent to $33.7 billion from $30.7 billion a year earlier, the central bank indicated, as merchandise imports rose 3.7 per cent and merchandise exports fell 3.2 per cent.

Foreign direct investment in Egypt rose to about $4.1 billion in the last fiscal year compared with $3.8 billion in the previous year, the central bank pointed out, attributing the increase to a net inflow for oil sector investments.