Egypt’s balance of payment declines by over 500% in 2022

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The Central Bank of Egypt revealed Egypt’s Balance of Payment declined by over 500% during the first nine months of the 2021/2022 fiscal year, compared to the same period in 2020/2021, as it recorded minus USD 7.3 billion compared to plus USD 1.79 billion previously. The main bulk of the deficit occurred during Q3 of 2021/2022 with the eruption of the Russian-Ukrainian war. The balance of payment is all transactions between all entities in one country and the rest of the world. It shows the country’s financial status over a certain period, usually a quarter or a year.

CBE attributed the decline mainly to the regression of portfolio investment, known as “hot money” because it focuses on short-term financial investment in treasury bonds and bills and flies quickly with crises, as it declined from USD 16 billion down to minus USD 17.2 billion.

The deficit of BOP coincided with the shortage of investment income balance that compares the income the country gets from a foreign investment against the payments exiting the countries to the world as revenues and interests of portfolio investment and foreign debts. This deficit hits 27% with the increase of transaction of profits of foreign direct investment to abroad and the increase of interest rates that increased revenues of portfolio investment. The data for Q4 is forecasted to show a further decline in hot money because of the ongoing war and the increase in interest rates in the USA.