Many economists view the deficit in the Egyptian trade balance resulting from the increase in the value of merchandise imports over the value of merchandise exports as one of the main chronic problems of the Egyptian economy, given the historical depth of this deficit, which extends for past decades and has continued uninterruptedly since 1974 until now.
In addition to its historical increase in value, which makes it more than the surpluses achieved by service trade, labor remittances abroad, foreign aid, and the low percentage of merchandise exports covering imports, which in the last three decades ranged between 26% for the lowest percentage in the fiscal year 1998/1999 and between 61% for the highest percentage in the fiscal year 2005/2006, but it often ranges from 30% to 40%.
The relative distribution of exports indicates that fuel exports account for 41% of derivatives, crude oil and natural gas, and finished goods account for 37% of fertilizers, medicines, ready-made clothes, woven fabrics, aluminum, dairy products, and carpets.
This was the main reason for the problem of recurring dollar shortages during the past decades, and here are the Egyptian banks returning, after a few weeks of devaluing the pound against the dollar last month, to stop opening credits or collection documents for importers during the last two weeks due to the scarcity of the dollar, which means the continuation of the crisis and insufficiency. The Fund's loan and the accompanying parallel loans from countries and international institutions to bridge the dollar gap, which exceeds $40 billion.
To identify the causes of this chronic trade deficit requires reviewing the relative composition of export and import commodities.
The data announced by the government statistics agency expresses the flow of goods through customs, entering and leaving, regardless of the arrival of the value of their exports and the payment of the value of those received from them, as do the Central Bank data, which indicated that the trade deficit reached 43 billion dollars, as a difference between imports worth 87 billion dollars and exports. amounted to 44 billion dollars.
The relative distribution of exports indicates that fuel is exported by 41% of derivatives, crude oil and natural gas, and finished goods 37% of fertilizers, medicines, ready-made clothes, woven fabrics, aluminum, dairy products and carpets, semi-finished goods 13.5% of gold, chemicals, petrochemicals and cast iron, and raw materials 7 % of vegetables, fruits, potatoes and raw cotton.
Multiple deficits in machines, cars and metals
While the relative distribution of imports refers to the export of intermediate commodities with 34% of spare parts for machines, spare parts for cars, vegetable oils, paper and chemicals, consumer goods 25% of passenger cars, medicines, fabrics, clothes, threads, meat and fish, fuel 16% of derivatives, crude oil and natural gas, and investment goods. 11.5% of machines, cranes, winches, pumps for liquids and air, computers and communications equipment, and raw materials 11% of corn, wheat, iron ores and raw sugar.
And through the trade balances of a number of commodity groups, it is possible to reach the imbalances according to the commodity balance of machinery, appliances, electrical equipment and their parts, as the deficit amounted to 11 billion dollars as a difference between exports of 3 billion dollars and imports of 14 billion dollars, to include the deficit of mobile phones that were exported at a value of 65 million dollars, While mobile devices worth $1.5 billion were imported, the deficit was repeated with wires and cables, computers, air conditioners, pumps, household electrical appliances and their spare parts.
In the grain balance, the deficit was $7.5 billion, as a difference between $7.9 billion in imports versus $437 million in exports. The deficit included corn at $2.7 billion, wheat at $2.4 billion, soybeans at $2.3 billion, and rice alone with a surplus of $13 million.
This is expected in light of the low self-sufficiency rate, which according to the official data of the Statistics Authority in 2020 reached 45% for maize, 41% for wheat and less than 1% for soybeans.
The deficit in the balance of trade in vehicles, vehicles, and other means of transportation amounted to $5.2 billion, as a difference between imports amounting to $5.4 billion and exports amounting to $243 million. In passenger cars, the value of imports amounted to two billion dollars and the value of exports amounted to $86 million, despite the presence of many Egyptian car factories, and auto spare parts. Tractors and their parts, imports amounted to 1.9 billion dollars and exports amounted to 107 million dollars.
The cotton trade suffered a deficit
In the balance of food commodities excluding grains, the deficit amounted to 4.8 billion dollars, as a difference between imports of 9.5 billion dollars and exports of 4.7 billion dollars. Food is less than 10%.
The deficit in the balance of chemical products reached $4.5 billion, as a difference between imports of $10.1 billion and exports of $5.6 billion. The deficit concentrated in pharmaceutical products at about $4 billion and chemical products at $932 million, while fertilizers achieved a surplus of $1.7 billion with the rise in global prices before and after the Russian war. Ukrainian.
In the balance of ordinary minerals and their products, the deficit was 4.4 billion dollars, as a difference between imports of 7.5 billion dollars and exports of 3.1 billion dollars.
In the balance of textile materials and their products, the deficit amounted to one billion dollars, as a difference between imports amounting to 4.5 billion dollars and exports amounting to 3.5 billion dollars, as a result of the deficit in synthetic fibers at 1.5 billion dollars, in raw cotton 157 million dollars, and in cotton yarn 110 billion dollars.
The deficit in raw cotton trade is due to the import of short-staple cotton for the local industry, while long-staple cotton is exported, while clothing achieved a surplus of $627 million and cotton textiles a surplus of $464 million.
Failure of management decisions to reduce imports
The commodity group that achieved a surplus was fuel at a value of $4.4 billion, as a difference between exports amounting to about $18 billion and imports amounting to $13.5 billion. The surplus came due to natural gas trade achieving a surplus of $6.7 billion, and catering for ships and aircraft amounting to $675 million, while oil products trade achieved a deficit. With 2.2 billion dollars, and crude oil, a deficit of 680 million dollars.
If the fuel trade balance achieved a surplus of $4.4 billion, then the balance of payments data for the same fiscal year indicated that foreign oil and gas companies operating in Egypt transferred $7.3 billion abroad during the fiscal year representing their share of production specified in production contracts, which means that even the trade balance Fuel has achieved a real deficit of $ 2.9 billion.
Successive governments have tried to remedy the chronic trade deficit by reducing imports, including what happened in late 2015 by requiring approval by the Ministry of Foreign Trade for foreign factories that export their products to Egypt, despite the objection of the European Union and the contradiction with many of the free trade agreements that are linked to it. Egypt is with multiple countries and regional groupings, and that rationalization was repeated late last year by requiring the approval of the Ministry of Finance on imports before they are shipped.
The Central Bank added to this the cancellation of the method of financing imports through the most common collection documents and replacing them with the method of documentary credits last February, which faced objection from business organizations, because it caused disruption to the arrival of raw materials and production requirements to factories, which reduced production and export as well, given that industrial products contain 60% as imported components other than fuel.
This prompted the new central bank governor to promise to cancel the method of financing imports through documentary credits before the end of this year, in response to the business community and the International Monetary Fund as one of the demands of the new loan that Egypt requested from him, which we doubt can be achieved for several more months until the second half of next year. .
This is cited as evidence of the central administration’s reversal of its decision to liberalize the exchange rate recently, and convert it to a managed exchange rate, as was the case from last March until the reduction last month, and this is reinforced by the continuation of the large difference between the exchange rate in banks and its price on the black market, and had it not been for the demand for it, what would it be? Their prices increased, in light of the continued reluctance of banks to sell dollars to customers at the declared rates.
The real deficit is larger than the official data
The most important is the trade deficit, which amounted to 43 billion dollars in the last fiscal year, as an unprecedented number historically, and came despite the improvement in exports, which increased by 53% to achieve a record, benefiting from global inflation and the increase in the prices of many export commodities such as oil, gas, fertilizers, and minerals.
However, imports were also affected by the increase due to the rise in world prices, so that the value of their increase amounting to 16.6 billion dollars was higher than the value of the increase in exports amounting to 15.2 billion dollars, which led to an increase in the trade deficit.
The aforementioned trade deficit number represents official transactions between exports and imports, while there are many other transactions that take place outside the official framework in which the value of imports exceeds official imports, including smuggling, such as smuggling of fabrics, which is the largest tributary for the manufacture of ready-made garments, and smuggling of electrical appliances, mobile phones, weapons, drugs, etc. The other side is the smuggling of Egyptian antiquities abroad.
In addition, many importers resort to manipulating purchase invoices, and decreasing the value of imported goods to pay lower customs, which means in the end that the real value of the trade deficit is much higher than the official figures, and senior officials and businessmen acknowledge that the problem is greater than its size mentioned in the official data, which requires A package of measures in the short, medium and long term.
These measures must focus on the productive sector, improving the investment climate, and increasing the industrial and technological component of exports, and not just administrative or police measures to reduce imports that have proven to fail in light of the continued increase in the value of imports in the past years, despite their implementation, given that these imports are linked to a real industrial, agricultural, service, and consumer need, and the presence of A lobby for importers is benefiting from international pressure to increase these imports and delaying the production issue is among the priorities of the ruling regime.