Egypt’s Current Account Deficit Surges To $5.9B In Q1 FY24/45 

January 20, 2025

 

Egypt’s current account deficit surged to $5.9 billion in the July-September 2024 quarter, more than double the $2.8 billion recorded for the same period a year earlier, impacted by a higher trade deficit and a plunge in Suez Canal revenues, according to a statement by the Central Bank of Egypt (CBE) on January 16.

Lower Suez Canal revenues

Suez Canal revenues plummeted by 61.2% in the first fiscal quarter, starting July 1, to $931.2 million, from as high as $2.4 billion during the same period a year ago, the statement showed.

This was mainly attributed to Red Sea tensions that obstructed maritime navigation, which caused several ships to change their shipping routes. The number of ships transiting the Suez Canal declined by 51% during the quarter.

In a statement issued by the Suez Canal Authority (SCA), Osama Rabie, Chairman of SCA, announced that 20,148 ships with one billion tons used the canal as transit during FY2023/2024, down from 25,911 ships with 1.5 billion tons of cargo in FY2022/2023.

The decline in Suez Canal revenues was partially offset by higher remittances that nearly doubled to $8.3 billion from $4.5 billion in the July-September 2023 quarter, the central bank report added. Notably, Egyptian remittances saw a 73.8% year-over-year increase in May 2024, following economic reforms implemented on March 6, according to data from the Central Bank of Egypt.

Other key indicators

Net foreign direct investment inflows grew to $2.7 billion from $2.3 billion during the same quarter, while tourism revenues rose to $4.8 billion from $4.5 billion.

Meanwhile, banks’ foreign assets recorded a net inflow of $2.1 billion compared to an outflow of $731 million, while banks’ liabilities witnessed an inflow of $729.8 million compared to an outflow of $187.2 million.

The central bank statement reported an overall Balance of Payments (BoP) deficit of $991.2 million, compared to $228.8 million in the same period.

Trade deficit up

Egypt’s non-oil trade deficit rose by 48.5% in the first quarter of FY 2024/2025, increasing $3.2 billion to $9.8 billion, up from $6.6 billion the previous year, the CBE statement noted. This was driven by a $4.4 billion rise in non-oil product imports, which reached $17.7 billion, primarily due to higher imports of wheat, soybeans, pharmaceuticals, gauze pads, vaccines, and spare parts for electric household appliances.

Non-oil merchandise exports also increased by $1.2 billion, reaching $7.9 billion, with notable growth in exports of fresh/dried fruits, aluminum, vegetables, and wires and cables.

On the other hand, the oil trade deficit rose by $2.9 billion to $4.2 billion, due to higher imports and a decline in oil exports.

Big targets

Egypt’s Minister of Investment and Foreign Trade Hassan El-Khatib reported that the country’s total exports reached $40 billion in 2024. Additionally, Egypt aims to boost exports to $145 billion annually by 2030, according to a September 2024 USAID announcement.

Egypt’s economic growth

Egypt’s Gross Domestic Product (GDP) growth stood at 2.4% in the fourth quarter of the 2023-24 fiscal year, marking an annual growth rate of 2.4%, down from 3.8% the previous year, according to the planning ministry. The ministry attributed the slowdown to persistent geopolitical tensions, global economic uncertainty, and the government’s contractionary policies.

In December, Egypt’s annual inflation rate eased to 23.4%, down from 25% a month earlier, mainly due to a decline in food and beverage prices.

According to the European Bank for Reconstruction and Development (EBRD), Egypt faced severe macroeconomic stress, including high debt, unstable foreign exchange policies, and declining investor confidence, leading to high inflation and a parallel foreign exchange market. This improved after the $35 billion Ras El Hekma deal and an expanded IMF loan program, followed by monetary and fiscal reforms, including a shift to a more flexible exchange rate.