05:35 PM
Tuesday 09 July 2024
Written by: Manal Al-Masry
Despite a decrease in revenue from three key sources, Egypt’s foreign exchange reserves increased by approximately 8%, reaching $79 billion during the first nine months of the fiscal year ending last June. This is compared to roughly $73 billion during the same period the previous year. This increase is primarily attributable to direct investments in Ras El Hekma City.
According to the balance of payments performance for the first nine months of the last fiscal year (from July 2023 to March 2024), foreign exchange inflows to Egypt stemmed from five sources: foreign direct investment, tourism, remittances from Egyptians working abroad, Suez Canal revenues, and exports.
The $35 billion Ras El Hekma development agreement with the UAE was the main driver of Egypt’s foreign direct investment (FDI) growth.
Egypt received the initial tranche of $15 billion from the UAE’s Abu Dhabi Development Holding Company in February and March, followed by the second and final tranche of $20 billion in May.
Decreases in Egypt’s revenue from the Suez Canal, remittances from Egyptians working abroad, and exports limited the overall increase in foreign exchange reserves.
Outlined below are Egypt’s foreign exchange resources for each of the five sectors during the first nine months of the fiscal year (2023-2024) compared to the same period of the previous year (2022-2023):
1- Foreign direct investment: increased to $23.71 billion from $7.94 billion in the same period last year, an increase of 198% year-on-year.
2- Tourism: It recorded $10.9 billion from $10.3 billion, an increase of 5.8% on an annual basis.
3- Remittances of Egyptians abroad: decreased to $14.5 billion from $17.5 billion, a decrease of 17.1% on an annual basis.
4- Suez Canal revenues: decreased to $5.8 billion from $6.2 billion, a decrease of 7.4% due to tensions in the Red Sea region.
5- Exports: Decreased to $24.12 billion from $31.1 billion, down 22% year-on-year.
05:35 PM
Tuesday 09 July 2024
Written by: Manal Al-Masry
Despite the decline in 3 resources, Egypt’s proceeds from direct foreign exchange resources increased by regarding 8%, recording regarding $79 billion during the first 9 months of the fiscal year ending last June, compared to regarding $73 billion during the same period last year, thanks to the proceeds from direct investments in Ras El Hekma City.
According to the balance of payments performance for the first 9 months of the last fiscal year (from July 2023 to March 2024), foreign exchange inflows to Egypt came from 5 sources: foreign direct investment, tourism, remittances from Egyptians working abroad, the Suez Canal, and exports.
The $35 billion Ras El Hekma development deal with the UAE was the biggest factor in Egypt’s foreign direct exchange (FDI) growth.
Egypt received the first tranche of $15 billion from the UAE’s Abu Dhabi Development Holding Company in February and March, and received the second and final tranche of $20 billion last May.
The decline in Egypt’s revenues from the Suez Canal, remittances from Egyptians working abroad, and exports limited the increase in foreign exchange resources.
In the following lines, Masrawy presents the foreign exchange resources for each of the five resources sectors during the first 9 months of the fiscal year (2023-2024) compared to the same period of the previous year (2022-2023):
1- Foreign direct investment: increased to $23.71 billion from $7.94 billion in the same period last year, an increase of 198% year-on-year.
2- Tourism: It recorded $10.9 billion from $10.3 billion, an increase of 5.8% on an annual basis.
3- Remittances of Egyptians abroad: decreased to $14.5 billion from $17.5 billion, a decrease of 17.1% on an annual basis.
4- Suez Canal revenues: decreased to $5.8 billion from $6.2 billion, a decrease of 7.4% due to tensions in the Red Sea region.
5- Exports: Decreased to $24.12 billion from $31.1 billion, down 22% year-on-year.
Egypt’s Foreign Exchange Resources: A Closer Look
Egypt’s economy continues to show signs of resilience, despite global economic challenges. In the first 9 months of the fiscal year ending June 2024, Egypt’s foreign exchange resources increased by 8%, reaching $79 billion, compared to $73 billion during the same period last year. This positive development can be attributed to the substantial influx of direct investments, particularly from the Ras El Hekma City development project.
Key Drivers of Foreign Exchange Inflows
Five main sources contribute to Egypt’s foreign exchange resources. They are:
- Foreign Direct Investment (FDI): This sector is a significant driver of economic growth, primarily because of the Ras El Hekma development project, a joint venture with the United Arab Emirates (UAE). This project witnessed the injection of $35 billion in investment, boosting Egypt’s FDI significantly. The first tranche of $15 billion was received in February and March, followed by the second and final tranche of $20 billion in May 2024.
- Tourism: Despite the global economic uncertainties, Egypt’s tourism sector witnessed a steady increase, registering $10.9 billion in revenue for the first 9 months of the fiscal year. This represents a 5.8% growth year-on-year.
- Remittances from Egyptians Abroad: This source experienced a decline, reaching $14.5 billion for the period, a 17.1% drop compared to the previous year. This decrease can be attributed to several factors, including economic conditions in host countries and potential changes in remittance patterns.
- Suez Canal Revenues: Egypt’s Suez Canal, a vital international shipping route, experienced a slight decline in revenue, registering $5.8 billion – a 7.4% drop from the previous year. This can be partly attributed to tensions in the Red Sea region.
- Exports: Egypt’s exports saw a significant decline, reaching $24.12 billion, a 22% drop compared to the previous year. This decline reflects global economic conditions and trade dynamics.
Analyzing Egypt’s Foreign Exchange Resources
While the significant increase in FDI due to the Ras El Hekma project contributed positively to Egypt’s foreign exchange resources, the decline in remittances, Suez Canal revenues, and exports raises concerns. To maintain sustainable economic growth, it is crucial to diversify revenue streams, implement strategies to attract more foreign investments, and promote non-oil exports.
Table: Egypt’s Foreign Exchange Resources (First 9 Months)
| Source | 2023-2024 (USD Billion) | 2022-2023 (USD Billion) | Year-on-Year Change (%) |
|---|---|---|---|
| Foreign Direct Investment | 23.71 | 7.94 | 198% |
| Tourism | 10.9 | 10.3 | 5.8% |
| Remittances | 14.5 | 17.5 | -17.1% |
| Suez Canal | 5.8 | 6.2 | -7.4% |
| Exports | 24.12 | 31.1 | -22% |
The table highlights the significant impact of the Ras El Hekma project on FDI, contributing to a substantial year-on-year increase. It also underscores the importance of diversifying Egypt’s foreign exchange resources to mitigate the impact of potential declines in specific sectors.
Outlook for the Future
Egypt’s economic outlook remains cautiously optimistic. The government is committed to implementing structural reforms and attracting more foreign investments. The focus on developing key sectors such as tourism, renewable energy, and infrastructure is expected to contribute to a more diversified economy and drive sustainable growth. Continued efforts to attract and retain foreign investors, combined with a supportive business environment, can help strengthen Egypt’s financial position and create new opportunities for growth and prosperity.
In conclusion, while Egypt’s foreign exchange resources received a significant boost from the Ras El Hekma project, the country needs to address the challenges posed by the decline in remittances, Suez Canal revenues, and exports. Diversifying the economy, strengthening export competitiveness, and attracting long-term investments remain crucial for ensuring sustained economic growth and resilience for the future.
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