Reserves down EGYPT's international reserves dropped to new lows at the end of January. According to the Central Bank of Egypt (CBE) hard currency reserves reached $13.6 billion at the end of January 2013, down from $15 billion at the end of December 2012. Experts believe the new level of reserves is worrying because it is below the minimum needed to cover three months of imports of basic goods such as food and fuel. Better growth THE EGYPTIAN economy grew by 2.6 per cent in the first quarter of the 2012/13 fiscal year, the monthly Financial Bulletin issued by the Ministry of Finance said this week. This is an improvement on the 0.3 per cent growth recorded during the same period in 2011, but below the 3.3 per cent in the last quarter of fiscal year 2011/12 and much below the 5.5 per cent growth rate in 2010. The government is hoping for 3.5 per cent growth in the current fiscal year, which ends in June. Higher budget deficits EGYPT's budget deficit reached LE91.5 billion, or 5.1 per cent of GDP, in the first six months of the current fiscal year (2012/13), according to the Ministry of Finance's January Financial Bulletin. This is a considerable increase on the same period last year, which saw a budget deficit of LE73.8 billion. Government officials had previously expected the deficit to reach LE200 billion by the end of the fiscal year, and experts believe that the solution to containing Egypt's budget deficit lies in rationalising fuel subsidies. The Middle East News Agency quoted Minister of Petroleum Osama Kamal as saying that the government had spent LE55 billion in the first half of the current fiscal year on fuel subsidies, which is expected to bring total fuel subsidies for the full year up to LE110 billion. Only LE70 billion had been earmarked for fuel subsidies for the current fiscal year, but due to the little action taken by the government, experts do not believe that this target will be met. Fuel subsidies reached LE115 billion in the 2011/12 fiscal year. A smaller BOP deficit EGYPT's balance of payments (BOP) recorded an overall deficit of $0.5 billion during the first quarter of the current fiscal year, compared to a deficit of $2.4 billion during the same period last year. According to the Ministry of Finance, this can be attributed to a notable increase in workers' remittances and a decline in imports. Egyptian workers' remittances from abroad boosted private transfers, which witnessed a notable increase of 21 per cent to a record $4.9 billion during the July to September period of 2012/2013, compared to $4 billion during the same period the year before. Private transfers are ranked as the country's most important source of foreign currency, constituting 27.8 per cent of total current account receipts. Meanwhile, Egypt's trade deficit dropped by 12 per cent to register a deficit of $6.9 billion during the first quarter of 2012/2013, compared to $7.8 billion in the same quarter last year. This is due to a three per cent increase in exports to a record $6.9 billion, along with a five per cent decrease in import payments to reach $13.8 billion. E-payment expansion THE INTERNATIONAL Finance Corporation (IFC) will invest $6 million in Fawry, the Egyptian electronic payment provider. The investment would be directed to expanding Fawry's network payment terminals across Egypt. Fawry currently has 20,000 payment locations and plans to increase to 35,000 more by 2016. This is expected to help consumers pay bills and make it easier for businesses to receive payments. “What we have learned from the Arab Spring is the need to create jobs,” said Mouayed Makhlouf, IFC director for the Middle East and North Africa. “The region needs to create from 50-75 million jobs over the next decade,” Makhlouf added during a press conference in Cairo this week. Makhlouf stated that the private sector could help Egypt's economy by creating jobs and demonstrating to investors that there is a long-term potential in the country. Ashraf Sabri, Fawry CEO, stated that although consumption constitutes 80 per cent of the GDP, electronic payment does not exceed one per cent. He added that electronic payment has big potential in Egypt where total consumers' payment to various businesses amounts to LE100 billion. Launched in 2009, Fawry is a local electronic payment company which offers a one-stop destination where consumers can pay various bills. In 2012, the IFC has invested some $506 million in Egypt.
