Sahar Damaty, former Deputy Chairperson of Banque Misr, has attributed the recent shift to a deficit in Egypt’s balance of payments during the first quarter of FY 2024/2025 to several critical factors, with rising import levels being one of the most significant drivers. These imports include both petroleum and non-petroleum goods, which have placed considerable pressure on Egypt’s external financial position.
In a comprehensive interview with Al Arabiya Business, Damaty further explained that another key contributor to the widening deficit was the sharp decline in Suez Canal revenues. The canal, a cornerstone of Egypt’s foreign exchange earnings, experienced a drop exceeding 70% due to the ongoing geopolitical tensions. However, Damaty emphasized that as geopolitical stability improves, these revenue streams are expected to recover, providing much-needed relief to the nation’s economy.
Despite the deficit, Damaty highlighted several mitigating factors that have partially offset the economic strain. Notably, the increase in remittances from Egyptians abroad, which continue to flow into the country at healthy levels, as well as a notable recovery in tourism revenues, have both played pivotal roles in easing the financial pressure.
Looking ahead, Damaty forecasted that Egypt’s balance of payments deficit could persist for some time. Nevertheless, she pointed to the government’s ongoing efforts to address this imbalance. These efforts include a continued push to support the tourism sector through strategic investments, such as the privatization of the management of Egyptian airports, and the development of key tourist destinations, including the ministries’ district and central Cairo. Additionally, Egypt’s expansion of its hotel infrastructure, particularly the increase in room capacity, is expected to further bolster the sector’s contribution to the economy.
Damaty also underscored the Egyptian government’s commitment to industrial localization. In line with its broader economic strategy, Egypt is working to reduce its reliance on foreign imports by focusing on the domestic production of key goods. Concurrently, the government is enhancing its export incentives to stimulate growth in the export sector, which is seen as a crucial pillar for Egypt’s long-term economic stability.
According to the latest balance of payments report released by the Central Bank of Egypt, the country’s external transactions for Q1 of fiscal year 2024/2025 (spanning July to September 2024) resulted in a cumulative deficit of $991.2 million. This marks a stark contrast to a surplus of $228.8 million recorded during the same period in the previous fiscal year. Despite the deficit, capital and financial transactions presented a more positive outlook, with a net inflow of approximately $3.8 billion, nearly double the $1.8 billion seen during the comparable period in the previous year.
Regarding foreign direct investment (FDI), Egypt registered a net inflow of approximately $2.7 billion during Q1 FY 2024/2025, surpassing the $2.32 billion recorded in the same quarter of the previous year. This growth in FDI reflects a notable increase in foreign capital inflows, signaling continued investor confidence in Egypt’s economic potential despite the current challenges.
