Egypt's overall balance of payment posts $7B surplus in H1 of FY2016/17

CAIRO - 8 March 2017: Egypt's overall balance of payment recorded a surplus of $7 billion in the first half (H1) of fiscal year 2016/2017 (to end June 30), against a deficit of $3.4 billion in the same period a year earlier, the Central Bank of Egypt (CBE) announced Wednesday.

On Nov. 3, the CBE abandoned its currency peg against the U.S. dollar, allowing the pound to move up and down depending upon supply and demand.

A jump in capital and financial accounts’ net inflow to $17.6 billion in H1, up from $6.2 billion during the same period a year earlier, was the reason behind this surplus, said the CBE.

During the second quarter of FY 2016/2017 (October- December), the overall BOP surplus surged to $5.1 billion, from $ 1.9 billion in quarter one (July-September).

"This came in the wake of the decision of the liberalization of the Egyptian pound’s exchange rate in November 2016. … This decision had a positive impact on the BOP components during the period," said the CBE.

Meanwhile, Egypt's current account deficit widened to $9.6 billion in H1, up from about $9.4 billion a year earlier. However, it improved in the second quarter by 6.4 percent compared with the first quarter, and by 13.1 percent compared with the corresponding period last year.

Net foreign direct investment edged up to $4.3 billion from $3.1 billion, while Suez Canal revenues dropped 5 percent to $2.5 billion.

Portfolio investments achieved a net inflow of $212.9 million against a net out flow of $1.6 billion. This was driven by the rise in foreigners' investments on the EGX, recording net purchases of $331.7 million, in addition to foreigners' investments in Egyptian treasury bills which increased to $686.7 million, versus net sales of $38.3 million, according to the report

Floating the pound along with introducing a value added tax and slashing energy subsidies were on top of Egypt's ambitious economic reform program - backed by the International Monetary Fund - to restore macroeconomic stability and lure FDI.