Egypt FX reserves hit record $36bn but debt surges to $74bn

by Editor

August 2, 2017 | 3:12 pm
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Egypt’s foreign-currency reserves jumped to a record $36.04bn in July, as investor confidence surged since the country embarked on an International Monetary Fund-backed economic program last year.

Net international reserves rose by $4.7 billion helped by a $1.25 billion loan installment from the IMF, according data from central bank of Egypt which is often used in comparison with Nigeria.

Egypt’s reserves saw total inflows of $7.7 billion in July, including $3.7 billion in foreign investments and $4 billion from the local economy according to central bank Governor Tarek Amer.

Though reserves have rebounded, a weaker currency coupled with cuts to fuel subsidies have helped push inflation above 30 percent and prompted the central bank to raise interest rates by 7 percentage points since November.

Egypt’s foreign debt has also ballooned to $73.9 billion in March from $53.4 billion a year earlier.

Surging prices are pressuring Egypt’s 93-million population, half of which lives near the poverty line, as the government tries to ease the pain through boosting social programs and cutting taxes for people on lower incomes.

Investors have poured money into Egyptian debt and equities since authorities removed most currency restrictions and raised interest rates in November to end a dollar-shortage and secure a $12 billion IMF loan.

The government has also twice tapped international bond markets, raising $7 billion.

“Egypt’s reserves now cover almost eight months’ of imports, which adds credibility to the new currency regime,” Hany Farahat, an economist at Cairo-based CI Capital Holding, said by phone.

The data show that Egypt is able to attract strong inflows, “implying the country’s currency problems are almost over,” he said.

More than $13 billion has flowed into Egyptian Treasury Bills as of July 25, with yields soaring over 22 percent.

Most of those funds, however, go into the central bank’s “repatriation fund” that guarantees expedited transfer of money for foreign investors.

by Editor

August 2, 2017 | 3:12 pm
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