Egypt current account hits surplus buoyed by Gulf aid

CAIRO: Egypt’s current account recorded a surplus in the first quarter of the financial year, boosted by billions of dollars in aid from Gulf states.
The current account ran a surplus of $757 million between July and September, driven by a massive increase in official transfers, according to a balance of payments statement posted on the central bank’s website.
Saudi Arabia, the UAE and Kuwait pledged over $12 billion in loans and donations, including petroleum products, after Mursi was forced out of office following mass protests against him. Egypt recorded a current account deficit of $1.26 billion in the same period last year.
“Egypt did not usually have a surplus. In the current circumstances, it was definitely the Gulf money that made this shift,” said Mohamed Abou Basha, Cairo-based economist at EFG-Hermes.
Official transfers, including cash and commodities, shot up to $4.27 billion in the first quarter of the financial year, which started on July 1, from $40 million a year earlier, the central bank said.
Tourism, which had been gradually improving from a collapse following Egypt’s 2011 uprising, took another blow in the first quarter as many countries imposed travel bans on Egypt amid violent turmoil after Mursi’s removal.
Tourism receipts tumbled to $931.1 million down from $2.64 billion a year earlier.
The number of tourist nights spent in Egypt fell by 57 percent to about 15 million and the average visitor’s spending also dropped, the central bank said in the statement accompanying the first quarter data.
Oil exports for the first quarter rose by $347 million to $2.79 billion.
Foreign direct investment in Egypt rose to $1.246 billion between July and September, up from $1.164 billion last year.
The central bank had previously put the figure for FDI in the first quarter of 2012 at $108 million, but said data from the petroleum sector had prompted an adjustment.
Egypt has burned through at least $20 billion — roughly half its reserves — supporting the currency since the 2011 uprising that overthrew autocrat Hosni Mubarak, which cut sharply into tourism revenues and foreign investment. Foreign reserves stood at $17.8 billion at the end of November.
The central bank introduced dollar currency sales a year ago to help counter a run on the pound, which trades markedly below its official rate in the black market.
At a central bank currency auction, the dollar was sold at a cutoff price of 6.8972 pounds, while two market participants said the dollar was offered for 7.42 pounds in the black market.
Finance minister Ahmed Galal said on Monday the government will finance an economic stimulus package of around 30 billion Egyptian pounds ($4.35 billion) using aid from Gulf states and savings.
Portfolio investment in Egypt reversed to a net inflow of $1.27 billion in the first quarter, from an outflow last year of $327 million, which the central bank said was mainly due to the issuance of government bonds at a value of $1 billion.
Net liabilities of the central bank increased to $3 billion from $503 million last year, mainly because of deposits transferred “from some Arab countries,” the statement said.
On Sept. 29, central bank governor Hisham Ramez said that Egypt had received $7 billion out of the $12 billion in aid pledged by Gulf Arab countries.