Egypt's balance of payments positive due to Arab aid

Ahram Online, Sunday 22 Dec 2013

Despite a sharp decrease in tourism revenues, Egypt's balance of payments records a surplus thanks to Arab aids

Tourism revenues dropped by 64.7 percent to less than $1 billion between July and September. (Photo: Reuters)
Egypt's balance of payments (BoP) recorded an overall surplus of $3.7 billion in between July and September against a deficit of $518.7 million during the same period a year earlier.
The significant improvement is largely due to transfers from Arab Gulf countries offered to Egypt after the ouster of president Mohamed Morsi.
Data from the Central Bank of Egypt (CBE) shows that net unrequited transfers increased to $ 8.3 billion during the first quarter of fiscal year 2013/14 driven by the pickup in net official transfers in the form of cash as well as commodities to $ 4.3 billion from $ 40.4 million.
Trade deficit shrank slightly by 1.6 percent as imports slightly declined but remains high at $7.7 billion.
According to the CBE, the improvement of the two mentioned factors (main components of the current account) were washed by "a dramatic fall of 91.8 percent in services surplus," as tourism revenues dropped by 64.7 percent to less than $1 billion against $2.6 billion.
Net inflows of foreign direct investments (FDI) increased by 7 percent pushed by increase of inflows for the oil sector. However, net inflows for Greenfield investments decreased by 37 percent.
Overall, the positive results of the BoP are due to a factor that cannot be replicated next year as three Gulf Arab countries (Saudi Arabia, Emirates and Kuwait) promised aid to Egypt worth $12 billion in support of its interim government.
The balance of payment is a" statement that summarises an economy’s transactions with the rest of the world for a specified time period" as explained by Investopedia.
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