Case Study III: The Egyptian Balance of Payments Egyptian Balance of Payments (USD million) 2015/16 2016/17 2017/18* -38683.1 18704.6 5674.3 13030.3 -57387.7 -9293.6 Trade Balance Exports proceeds Petroleum exports Other Exports Import payments Petroleum imports Other Imports Services Balance Receipts Transportation Of which, Suez Canal dues Travel (tourism revenues) Government Receipts Others Payments Transportation Travel Government Expenditures Others Investment Income Balance (Net) Investment Income Receipts Investment Income Payments Of which, Interest Paid Transfers Private (net) Of which, Remittances of Egyptians working abroad Official (net) Balance of Current Account * Preliminary -48094.1 6533 16079.3 9534.6 5121.6 3767.5 378 2399.2 9546.3 1339.1 4091 777.1 3339.1 -4471.7 396.9 4868.6 752 16790.7 16689.2 17077.4 101.5 -19831.1 -37274.8 -37276 21728. 2 25827 6589.5 8773 15138.7 17054 -59003 -63103 -12015.5 - 12489.8 -46987.5 -50613.2 5614.2 11122.4 15400.1 21486.9 7911.2 8707.9 4945.3 5706.7 4379.7 9804.3 776.4 636.7 2332.8 2338 9785.9 10364.5 1332.1 1480.2 2739.9 2451.5 1124.1 1493.5 4589.8 4939.3 -4568.5 -6279.6 497.9 835.4 5066.4 7115 1231.9 1616.1 21835.1 26470.9 21686.1 26264.7 | 21816.3 | 26392.9 149 2 06.2 -14394 -5962.3 Egyptian Balance of Payments (contd.) 2016/17 Capital & Financial Account Capital Account Financial Account Direct Investment Abroad Direct Investment In Egypt (net) Portfolio Investment Abroad Portfolio Investment in Egypt (net) Of which, Bonds Other Investment (net) Net Borrowing Medium- and Long-Term Loans Drawings Repayments Medium- and Long-Term Suppliers' Credit Drawings Repayments ST Suppliers' Credit (net) Other Assets CBE Banks Other Other Liabilities CBE Banks Net Errors & Omissions Overall Balance Change in CBE reserve assets (increase -) * Preliminary 2015/16 21176.7 -141.4 21318.1 -164.2 6932.6 192.1 -1286.8 -1444.8 15644.4 7102.7 -186.3 2523.4 -2709.7 1505.3 1560.7 -55.4 5783.7 -3476.9 -104.4 2092.1 -5464.6 12018.6 5857.7 6160.9 -4158.6 -2813 2813 31015.1 -113.3 31128.4 -175.1 7932.8 208.4 15985.3 5491.5 7177 9699.2 5156.8 7641.1 -2484.3 2795.1 2912.2 -117.1 1747.3 -12095.7 -27.5 -9462.5 -2605.7 9573.5 8128.6 1444.9 -2903.9 13717.2 -13717.2 (USD million) 2017/18* 21996.5 -150.7 22147.2 -271.2 7719.5 -20.8 12094.8 5293.2 2624.9 10278.8 6738.5 8846.4 -2107.9 1118.5 1313.6 -195.1 2421.8 -4511.9 -116.4 2161.7 -6557.2 -3142 -3879.2 737.2 -3246.5 12787.7 -12787.7 1 Question: Based on the discussion we had in class about the Egyptian BOP, and the Egyptian BOP data given above, analyze and explain carefully how the Egyptian Pound (EGP) foreign exchange rate influences (and maybe is influenced by too!) the sub-accounts of the balance of payments. Based on your answer, identify the possible "J-curve adjustment path" for the Egyptian economy. Illustrate how the J-curve notion relates to "Marshall-Lerner Condition". Case Study III: The Egyptian Balance of Payments Egyptian Balance of Payments (USD million) 2015/16 2016/17 2017/18* -38683.1 18704.6 5674.3 13030.3 -57387.7 -9293.6 Trade Balance Exports proceeds Petroleum exports Other Exports Import payments Petroleum imports Other Imports Services Balance Receipts Transportation Of which, Suez Canal dues Travel (tourism revenues) Government Receipts Others Payments Transportation Travel Government Expenditures Others Investment Income Balance (Net) Investment Income Receipts Investment Income Payments Of which, Interest Paid Transfers Private (net) Of which, Remittances of Egyptians working abroad Official (net) Balance of Current Account * Preliminary -48094.1 6533 16079.3 9534.6 5121.6 3767.5 378 2399.2 9546.3 1339.1 4091 777.1 3339.1 -4471.7 396.9 4868.6 752 16790.7 16689.2 17077.4 101.5 -19831.1 -37274.8 -37276 21728. 2 25827 6589.5 8773 15138.7 17054 -59003 -63103 -12015.5 - 12489.8 -46987.5 -50613.2 5614.2 11122.4 15400.1 21486.9 7911.2 8707.9 4945.3 5706.7 4379.7 9804.3 776.4 636.7 2332.8 2338 9785.9 10364.5 1332.1 1480.2 2739.9 2451.5 1124.1 1493.5 4589.8 4939.3 -4568.5 -6279.6 497.9 835.4 5066.4 7115 1231.9 1616.1 21835.1 26470.9 21686.1 26264.7 | 21816.3 | 26392.9 149 2 06.2 -14394 -5962.3 Egyptian Balance of Payments (contd.) 2016/17 Capital & Financial Account Capital Account Financial Account Direct Investment Abroad Direct Investment In Egypt (net) Portfolio Investment Abroad Portfolio Investment in Egypt (net) Of which, Bonds Other Investment (net) Net Borrowing Medium- and Long-Term Loans Drawings Repayments Medium- and Long-Term Suppliers' Credit Drawings Repayments ST Suppliers' Credit (net) Other Assets CBE Banks Other Other Liabilities CBE Banks Net Errors & Omissions Overall Balance Change in CBE reserve assets (increase -) * Preliminary 2015/16 21176.7 -141.4 21318.1 -164.2 6932.6 192.1 -1286.8 -1444.8 15644.4 7102.7 -186.3 2523.4 -2709.7 1505.3 1560.7 -55.4 5783.7 -3476.9 -104.4 2092.1 -5464.6 12018.6 5857.7 6160.9 -4158.6 -2813 2813 31015.1 -113.3 31128.4 -175.1 7932.8 208.4 15985.3 5491.5 7177 9699.2 5156.8 7641.1 -2484.3 2795.1 2912.2 -117.1 1747.3 -12095.7 -27.5 -9462.5 -2605.7 9573.5 8128.6 1444.9 -2903.9 13717.2 -13717.2 (USD million) 2017/18* 21996.5 -150.7 22147.2 -271.2 7719.5 -20.8 12094.8 5293.2 2624.9 10278.8 6738.5 8846.4 -2107.9 1118.5 1313.6 -195.1 2421.8 -4511.9 -116.4 2161.7 -6557.2 -3142 -3879.2 737.2 -3246.5 12787.7 -12787.7 1 Question: Based on the discussion we had in class about the Egyptian BOP, and the Egyptian BOP data given above, analyze and explain carefully how the Egyptian Pound (EGP) foreign exchange rate influences (and maybe is influenced by too!) the sub-accounts of the balance of payments. Based on your answer, identify the possible "J-curve adjustment path" for the Egyptian economy. Illustrate how the J-curve notion relates to "Marshall-Lerner Condition