CAIRO // Egypt's trade deficit has almost doubled in the last year to US$2.9 billion (Dh10.65bn) as higher oil and commodity prices weighed on import and export prices.
The trade deficit jumped 79.6 per cent to 17.5bn Egyptian pounds (Dh64.27bn) in April, the last month for which government data is available, from 9.7bn pounds a year earlier, reflecting sharply imbalanced trade flows.
Egypt, which relies heavily on petroleum and wheat imports to manage an expensive subsidy system, is facing an ever-widening balance of payments crisis as foreign currency revenues dwindle and it spends more on imports than it gets from exports.
While the nation's imports rose 19.4 per cent on the year to 32.6bn pounds, the value of exports fell 13.9 per cent to 15.1bn pounds in April, compared with 17.6bn pounds a year earlier, according to data from the government's statistics agency in Cairo.
Grain prices have hit record highs as crop failures ripple around the globe and they are likely to remain high for at least three years, the World Bank said this week. It threatens to push the price of many foodstuffs beyond the reach of countries such as Egypt, the world's biggest net importer of wheat.
Economists have warned dangerously low levels of foreign currency reserves and the failure to secure help from the IMF could leave the country in a full-blown crisis, forcing a sharp devaluation in the domestic currency.
The balance of payments fell deeper into the red in the first nine months of Egypt's fiscal year with a deficit of $11.2bn, against a shortfall of $5.5bn a year earlier, as tourism and investment were hard hit by the country's uprising in January last year.
A larger deficit puts further pressure on the local currency, already weighed down by lower foreign inflows from the key sectors that form the main sources of foreign currency.
Many see devaluation as inevitable and the most favourable forecasts show the pound falling another 5 to 10 per cent in the next 12 months.
Although the central bank has applied various monetary policy measures to stimulate growth, including selling various types of bond instruments in the domestic market, a 12.5 per cent increase in the budget deficit is expected this year, hampering optimism.
The budget deficit for this fiscal year, beginning July 1, will rise to $22.26bndespite the government's efforts to plug the deficit.
iPad users can read the digital edition of business section as it was printed via our e-reader app. Click here