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).

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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.

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