Mubasher: Moody's Investors Service said that the Central Bank of Egypt (CBE) published on 3 July balance-of-payments data for the first three quarters of the fiscal year ended on 30 June, 2016. This showed that Egypt’s (B3 stable) balance-of-payments position remains weak, according to a recent Moody’s report.
Egypt’s current account deficit stands at $14.5 billion as compared to $8.3 billion 2015, while the overall balance-of-payments deficit more than tripled to $3.6 billion from $1.0 billion, the report added.
Moody’s estimated that the country’s current account deficit reached 6.7% of GDP in the first quarter of 2016, up from 5.3% a year earlier. Meanwhile, its estimates for FY16 account deficit for Egypt are 5.2% of GDP.
“The widening deficit is credit negative because it reflects underlying structural weaknesses and increases external vulnerability risks,” Moody’s said.
It added “Net foreign direct investment has recovered somewhat since 2011, averaging $1.4 billion per quarter since then, with an increase to $2.8 billion during the first quarter of calendar year 2016.”
The cumulative net FDI inflows reached $5.8 billion for the period from July 2015 to March 2016, up from $5.1 billion during the same period a year ago.
“Net other investment, predominantly short-term supplier credits and other liabilities, have been rising since late 2014 and contributed $9.7 billion during the first three quarters of fiscal 2016, sharply up from $3.9 billion a year ago. However, this surplus was counterbalanced by a surge in net errors and omissions, which rose to a cumulative $3.1 billion and can be interpreted as a sign of capital flight.”
Egypt’s net international reserves have remained weak, with a level of around $16.5 billion since September 2015 and up until March. “However, CBE data for the three months from April to June 2016 indicate a slight increase in net international reserves to about $17.5 billion as of June, which suggests a marginal improvement in Egypt’s overall balance of payments during the fourth quarter of the past fiscal year,” according to Moody’s.
