A bank employee counts U.S. Dollar notes – REUTERS A bank employee counts U.S. Dollar notes – REUTERS

Remittances, BOP surplus keep rising after flotation

Sun, Dec. 10, 2017
CAIRO - 10 December 2017: Remittances of Egyptians abroad continued to hike as it registered $5.9 billion in the first quarter of (Q1) of fiscal year (FY) 2017/18, compared to $4.3 billion in the same period last year.

The Central Bank of Egypt (CBE) said in a Sunday announcement that Egypt achieved a $5.1 billion in surplus in the balance of payments (BOP) in Q1, compared to $1.9 billion in the corresponding quarter in FY 2017/18.

In Q4 of FY 2016/17, the remittances of Egyptians abroad hiked to record $4.7 billion, up from $4.3 billion in Q4 of the previous year. For the entire fiscal year 2016/17, remittances registered $17.4 billion, inching up 2 percent year-on-year.

The aforementioned numbers indicate that the flotation has succeeded in attracting Egyptian expatriates into transferring their cash back through the banking system instead of the informal channels that had been active before the exchange rate liberalization.

As for the BOP, it achieved a surplus of $13.7 billion in FY 2016/17, of which about $12.2 billion were collected in the period immediately following the CBE’s decision to liberate the Egyptian pound exchange rate.

This is due to the capital and financial account, which recorded a net inflow of $29 billion (against $21.2 billion) and the current account deficit narrowed to $15.6 billion (from $19.8 billion).

The surplus of BOP was mainly an outcome of the following developments: The net unrequited current transfers increased to $17.5 billion in FY 2016/2017 (from $16.8 billion), as a result of the hike of net private transfers, recording $17.3 billion (against $16.7 billion), due to the increase in workers' remittances, reaching $17.5 billion.

The CBE had floated the local currency in November 2016 with the aim of overcoming a sharp foreign currency shortage and a thriving dollar black market which squeezed the economy and discouraged foreign investors, exporters and Egyptian expatriates.

Foreign reserves in the CBE have been rising since the Egyptian government clinched a $12 billion three-year loan from the International Monetary Fund (IMF) in November, after Cairo started implementing an ambitious economic reform plan by floating the Egyptian pound, introducing a value added tax and slashing energy subsidies.
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