Including the dollar. Why did Egypt's trade deficit decline?



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The deficit in the trade balance fell by about 30% in January, attributed to experts for several reasons, including through the stabilization of the dollar and the purchasing power of customs.

The trade balance deficit declined sharply in January, reaching approximately $ 2.79 billion, compared with approximately $ 3.97 billion in January 2018, down 29.7% from the Central Agency for Public Mobility and Statistics. Egypt's exports amounted to around US $ 2.33 billion in January in the form of ready-made clothing, fertilizers and oranges, while the volume of imports from abroad in January amounted to US $ 5.12 billion, consisting of passenger cars, meat and raw materials from iron and steel .

What is the trade balance? The country's trade balance is defined as the difference between the value of exports and imports over a given period of the year, if the value of imports exceeds the volume of exports, that is, the deficit in the trade balance, if the volume of exports increases and imports become smaller, there is a trade surplus. This is one of the important economic indicators

What is the trade balance?

The country's trade balance is defined as the difference between the value of exports and imports over a given period of the year, if the value of imports exceeds the volume of exports, that is, the deficit in the trade balance, if the volume of exports increases and imports become smaller, there is a trade surplus. It is one of the important economic indicators, the value of which is in the analysis of its components and not in its absolute value.

There are several reasons why the trade balance deficit declined, inter alia:

The price of the customs dollar

One of the main reasons contributing to the reduction of the deficit in the trade balance is the stabilization of the price of the customs dollar for strategic raw materials.

Dr. Zeinab Awadallah, a professor of economics at the University of Alexandria, confirmed that the stabilization of the exchange rate also contributed to the activation of the export movement abroad, and therefore the value of exports significantly increased compared to the volume of imports, which led to a significant reduction in the trade deficit.

Minister of Finance dr. Mohamed Moait decided to keep the dollar at its current interest rate of 16 pounds in April, for strategic and necessary goods and other goods listed in the customs tariff and foreign parts and components imported from factories.

It was also decided to reduce the dollar to 17.38 non-essential items (recreational), compared with around 17.59 pounds in March, by about 21 piasters.

The customs dollar is defined as the price at which customs duties and taxes are levied on imports of goods from abroad, that is the price that varies daily according to the dollar rate in banks and thus the value on which the customs value of the imported products is based.

Read more: Statistics: $ 5 billion of imports from Egypt in January

Low purchasing power of citizens

According to prof. Ibrahim Abdullah, a professor of economics, has been raising the price of raw materials over the last period, especially since the decision to decide in 2016 to pound the pound has significantly contributed to reducing the purchasing power of citizens and their dependence on local products alternatives more expensive imported goods.

Abdullah added that a drop in purchasing power led to the unwillingness of traders to import a large proportion in comparison with previous years before pre-flotation and then reduce the volume of imports from the rest of the world.

In November 2016, the Central Bank decided to liberalize the exchange rate of the pound and to fix prices in accordance with the supply and demand mechanisms, so that the government or the central bank does not interfere with its determination directly or by any means, but its price is automatically determined on the currency market through the supply and demand mechanism, the exchange rate of the national currency against foreign currencies, and the value of the Egyptian pound for the first time decreased by 48%.

Dr. Zeinab Awadallah, a professor of economics, believes that the government must ensure a permanent reduction in the trade deficit, and must provide raw materials for domestic industry instead of imports from abroad. The monopoly of the dealers in the finals in order to lower high rates of inflation and activate the internal trade movement.

Read also: Export of gas and tourism. Egypt achieves the best economic performance

Transfers of Egyptians to the rest of the world

Remittances of Egyptians working abroad play an important role in supporting the national economy, as it is one of the most important sources of foreign currency for the country, relying primarily on the decision on liberalization of the exchange rate, and at the same time it is an integral part of the current account accompanying Egypt's transactions with the outside world. Current account deficit in the export activity, high surplus of service balance sheets in travel revenues and the Suez channel.

A report by the World Bank, the volume of remittances of expatriate Egyptians abroad to approximately $ 29 billion by the end of 2018, compared to about $ 18.2 billion in 2017, an annual increase of 17%.

The bank also announced that Egypt was ranked fifth in the world after remittance payments, pointing out that Egyptian remittances abroad had caused growth in remittances in the Middle East, last year by 9.1% a year.

According to the Central Agency for Public Mobility and Statistics, the number of Egyptians resident abroad is estimated at 9.5 million.

While about 70% of them in the Arabian Gulf countries are 50% in Saudi Arabia and 20% in the remaining Gulf states, about 30% are in Europe and North America, Egypt is one of the largest Arab countries receiving annual and sixth transfers worldwide . .

Also read: $ 85 million in Egyptian wire transfers in Jordan in October

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