Egypt unrest forces balance of payments deficit soar to $11.2bn

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Egypt witnessed an imbalance of payments during first nine months of 2011-2012 with a $11.2 billion deficit compared to a shortfall of $5.5 billion a year earlier, amid political turmoil, investment flight and tourism downturn.

The country’s economy is yet to recover from the uprising that toppled Hosni Mubarak in February 2011.

Tourism and investment, two of Egypt’s main sources of foreign currency, have suffered massive blows due to constant unrest.

According to central bank figures obtained by Reuters, the current-account deficit widened to $6.4 billion for the nine-month period from July-March 2011-12, from $4.7 billion in the same period a year earlier.

The state news agency, MENA, also published some of the main numbers but not a full breakdown.

Egyptians living abroad sent remittances of around $12.8 billion out of the net $13.3 billion. This figure grew from $8.9 billion in the corresponding period last year.

Egypt’s financial year begins on 1 July.

Foreign direct investment (FDI) plummeted to $218 million in the nine-month period of 2011-12 from $2.1 billion in the same time during 2010-2011.

Egypt benefitted by high FDI until a pro-democracy uprising toppled Mubarak’s autocratic rule.

The Middle East’s tourism hub suffered from a drop of $7.1 billion from $8.7 billion a year earlier in tourism receipts.

Portfolio investments show a net outflow of $4.6 billion, a significant growth from last year’s $969 million as a result of the exit of foreign holdings in Egyptian government debt instruments. Foreigner sale of treasury bills amounted $3.9 billion in the first nine month of the current financial year opposed to just $1.8 billion last year.

Egypt’s net foreign reserves, the Egyptian pound’s last line of defence against balance of payment pressures, climbed $302 million in May to reach $15.52 billion. The growth is set to get a massive boost by Saudi aid as well as other slight improvements in investments in the past few months.

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