Egypt’s Foreign Currency Reserves Drop to Lowest levels In 16 Months

The Central Bank of Egypt said that the foreign-currency reserves dropped in a great amount reaching $15.537 bn in the end of July after it was $17.546bn at the end of June.

The drop in Egypt’s foreign-currency reserves is at its lowest level in 16 months in July after authorities repaid about $2 billion in debt, highlighting the pressure the government is facing as it seeks a $12 billion International Monetary Fund loan, according to Bloomberg.

Official data show that the net international reserves dropped by more than 11%, the most in 16 years, to $15.5 billion. The central bank said it repaid $1.02 billion for Qatar’s holding of Egypt’s sovereign Eurobonds, $714.4 million to Paris Club creditors as well as the first installment of a Libyan deposit with the regulator.

Business activity in Egypt has been hampered by the dollar shortage that has gripped Egypt and created a black market where the pound is trading almost 30%below its official rate.

Jean-Paul Pigat, a senior economist at Dubai-based Emirates NBD, said that the drop in reserves “goes to show that the balance of payments pressures are still quite pronounced in Egypt. ““There’s significant pressure on the Egyptian pound to be devalued, and now it’s just a matter of getting the timing of the move right.”

The central bank will probably devalue the pound after receiving part of the IMF funds as well as assistance from other donors, said Pigat. At that point it should have enough cash to defend the currency, he said. Policy makers weakened the pound by about 13 % in March