Egypt’s Capital Inflows Fell by Half in FY2019/20 Amid Coronavirus Pandemic: CBE

Net inflows of the capital and financial account dropped by half to $5.4 billion in FY2019/20, down from the $10.9 billion registered in FY2018/19, according to the Central Bank of Egypt (CBE).

In a report issued Monday on the balance of payments performance in FY2019/20, the CBE attributed this decline in net inflows to the decrease in total inflows of Foreign Direct Investments (FDIs) in FY2019/20 from %16.4 billion in FY2018/19 to $15.8 billion - a 3.4 percent decline.

Meanwhile, according to the report, total outflows rose by 2.8 percent to $8.4 billion in FY2019/20 from $8.2 billion in FY2018/19.

These updates resulted in a contraction of 9.5 percent in net inflows of FDIs headed to Egypt in FY2019/20 to $7.5 billion from $8.2 billion in FY2018/19.

The report revealed that the current account deficit incresaed to $11.2 billion from $10.9 billion in F 2018/19, driven by the decline in the services surplus and the increase in investment income deficit, whichrepresents the difference between the investment income earned and paid from and to the external world on portfolio investment, direct investments, bank deposits and foreign debt.

Moreover, the report showed that net investments in the oil sector declined by 68.2 percent in FY2019/20, reaching a low of $1.1 billion.

It also revealed that investments in the non-oil sector witnessed a contraction worth $383.4 million in FY2019/20 to $1.1 billion.

This contraction was due to the decline in Greenfield investments projects, which dropped by $280.9 million; the drop in the real-estate investments in the domestic market, which contracted with $ 159.4 million; the increase in retained earnings, which recorded $4 billion; and the growth in credit balances surplus, which posted $1.2 billion.

As a result of the pandemic, portfolio investment saw outflows with a total of $7.3 billion in FY2019/20, compared to total net inflows of $4.2 billion that were recorded in FY2018/19.

Meanwhile, disbursements of medium and long-term loans and facilities increased by $2.4 billion, reaching around $6.6 billion, up from the $ 4.2 billion in FY2018/19.

On the investment income deficit, the report demonstrated that it slightly grew by $344.4 million, reaching $11.4 billion in FY2019/20, up from $11.0 billion in FY2018/19. At the same time, investment income receipts shrank by $72 million to $942.1 million.

On the other hand, the non-oil trade deficit was narrowed by $2 billion in FY2019/20 to record $36 billion, down from $38 billion in FY2018/19.

This was a result of the pickup in non-oil merchandise exports that rose by $1 billion to $17.9 billion and the retreat in non-oil merchandise imports to $53.9 billion, down from $55 billion.

Since the beginning of the impact of the COVID-19 pandemic around the second half (H2) of FY2019/20, the report showed that there was a deficit in the balance of payments of $9 billion during this period, compared to an overall surplus of $1.7 billion in the same period of FY2018/19.

The report attributed the drop in services surplus, which fell by half from $5.8 billion in the same period of FY2018/19 to $2.7 billion in H2 of FY2019/20 to $2.6 billion - a 54.9 percent decline.

In addition, FDIs in Egypt contracted by 38.4 percent to $2.5 billion in H2 of FY2019/20 from $4.1 billion in H2 of FY2018/19, according to the report.