Egypt’s Trade Imbalance: Time to Act

10 June, 2024

Egypt’s economy heavily depends on high-value imports like food, machinery, and medical supplies which strain the national budget.

Egypt’s trade imbalance, a glaring disparity between imports and exports, has been a persistent issue. Despite some progress, the gap remains vast. In 2022, the trade deficit soared to USD 48.7 bn. By 2023, it shrunk to USD 36.9 bn, and the first half of 2024 shows a further reduction to USD 18.7 bn. While these numbers indicate improvement, the underlying issues persist.

The roots of the problem :Egypt’s economy heavily depends on high-value imports like food, machinery, and medical supplies, which strain the national budget. Meanwhile, its exports consist mostly of low-value raw materials, failing to offset the import costs. This imbalance has severe economic repercussions such as currency devaluation, foreign reserves depletion, and rising external debt.

Contributing factors include;

• A dependence on imports Limited domestic manufacturing necessitates heavy reliance on imports.
• A lack of export diversification: Exports are undiversified, making the economy vulnerable to global market fluctuations.
• Trade barriers: Bureaucracy, poor infrastructure, and limited financing hinder export growth.

Government measures have had mixed results:

• Export promotion programs: Subsidies, international trade fair support, and export councils aim to boost exports.
• Trade agreements: Bilateral and multilateral agreements seek to reduce tariffs and make Egyptian products more competitive.
• Incentives for domestic production Tax breaks, reduced import duties on raw materials, and SME support aim to bolster local manufacturing.

Strategic recommendations: To bridge the trade gap, Egypt must focus on industries that meet three criteria: high local component use, value-added production, and ecosystem building to stimulate industrialization and job creation.

• Agri-produce Leveraging Egypt’s climate and proximity to the EU, products like tomatoes for concentrate and olives can thrive with better quality control and supply chain management.
• Glass production: With abundant raw materials, Egypt can shift from exporting raw materials to more profitable finished or semi-finished glass products.
• Fertilizer production: Utilizing local rock phosphate for phosphate and nitrogen-based fertilizers can boost export profitability.
• The cement industry: Capitalizing on Europe’s energy crisis, Egypt can export cement, utilizing underutilized assets.
• Home appliances and white goods: This sector can stimulate feeder industries and compete in regions like COMESA with favorable trade agreements.

Transmar’s role: For over 40 years, Transmar, a leading Egyptian shipping line, has facilitated the transportation of Egyptian goods to regional markets, helping producers reach wider customer bases. Their extensive regional network and partnerships with local industries promote export growth and enable them to explore new market avenues by adding trade routes.

Collaboration is key: Bridging Egypt’s trade imbalance requires a concerted effort. Government, businesses, maritime and logistics providers like Transmar, and other stakeholders must collaborate to drive positive change. By fostering an environment that incentivizes export growth, encourages domestic production, and optimizes logistics, Egypt can achieve sustainable economic growth. It’s time for all hands-on deck.