By: Nour Adel
Egypt's foreign exchange reserves reached $ 37 billion at the end of December 2017. Supported by the third tranche of $ 2 billion of the IMF's $ 12 billion loan, the foreign reserves recorded the highest level in its history.
The highest level in its history
After hitting $ 37 billion, the net reserve of the Central Bank of Egypt (CBE) is the highest level in its history since the start of registring reserve data in the early nineties, as reserve rates exceeded the level recorded before the outbreak of the revolution of January 25, 2011, which amounted to $ 36 billion.
Egypt's foreign reserves are steadily increasing since Tarek Amer has been appointed as the Governor of CBE in October 2015, as reserves fell only twice in July 2016 and October 2016. The country's external debt increased by 41.6% year-on-year to hit $ 79 billion dollars at the end of fiscal year 2016-17, which ended on June 30.
Reasons of the rise in net foreign reserves
The increase in Egypt's foreign exchange reserves is due to the following:
- The increase in foreign reserves is due to the IMF's tranche received at the end of December.
- In December 2017, IMF approved the disbursement of the second tranche worth $1.25 billion of Egypt's $12 billion loan.
- Obtaining the tranche also helped the reserve not be affected by the payment of obligations to Turkey, Libya and the African Bank during the last period.
- Dollar liquidity improved after the recover enjoyed by some sectors like tourism and investment.
- Foreign currency inflows have improved after remittances from expatriate Egyptians rose, which recorded about $ 24 billion in 2017.
- Meanwhile, CBE's data showed that the contribution of the gold balance in foreign reserves declined by 1.1% (equivalent to $ 30 million) by the end of December 2017 on a monthly basis.
An official source at CBE said that Egypt has paid about $ 30 billion of obligations and debts to third parties during 2017.
Egypt’s foreign debt increased by $ 23.2 billion or 41.6%, during the fiscal year 2016-17.
The impact on exchange rate
The exchange rate has not been significantly affected and will stabilize at EGP17 this year.
On 3 November 2016, CBE decided to liberalize the exchange rate of the pound against the dollar, in accordance with supply and demand mechanisms, and decided to increase interest rates by 300 points.
The coming period
According to current indicators, the reserves are expected to increase in the coming period, as Egypt is seeking to offer international bonds of $ 4 billion during the coming period.