(Bloomberg) -- Egypt’s financial dealings with the outside world turned positive last fiscal year after an influx of foreign investment following the flotation of the pound in November.
The North African nation recorded a balance of payments surplus of $13.7 billion in the year ending June 30, compared with a $2.8 billion deficit a year earlier, the central bank said in a statement on its website. Egypt saw about $16 billion of net investments in its debt and equities last year, versus an outflow of about $1.3 billion in the previous 12 months, the regulator said.
Egypt removed most restrictions on its currency in November in a bid to end a foreign-exchange crisis that crippled economic growth, paving the way to a $12 billion International Monetary Fund loan. Foreign reserves have grown to over $36 billion, a record, as the government increased borrowing from international financial institutions and friendly nations.
“Despite the improvement, I would not say the economy has turned a corner yet,” said Hany Farahat, senior economist at Cairo-based CI Capital. “More needs to be done to ensure such short-term gains are sustainable, especially if the Egyptian pound gains some value in the coming months.”
The current-account deficit, which includes trade in goods and services as well as financial transfers, narrowed 22 percent to $15.6 billion. The trade deficit narrowed 8.4 percent, or about $3.3 billion, to $35.4 billion as oil exports rose by $1.9 billion. Proceeds from non-oil exports rose 16 percent thanks to the “improvement of the competitiveness” after the pound lost about half of its value since the flotation, the central bank said.
Read more: Egypt to Keep Narrowing Trade Deficit After Pound Devaluation
Despite the improvement in competitiveness, the weaker pound, along with lower subsidies and an increase in value-added taxation, has propelled inflation to more than 30 percent, squeezing households in a country where about half of the population lives below or near the poverty line.
The central bank also said:
- Of the total surplus, $12.2 billion generated since November
- Net foreign direct investment rose to $7.9 billion from $6.9 billion as a result of $2.3 billion increase in oil sector
- Foreigners’ net purchases of Egyptian stocks reached $497 million from $157 million