Egypt’s foreign reserves give cause for concern
Egypt foreign reserves lost value at an accelerated rate last month, even as a cash injection from abroad raised the fund’s net worth for the first time since October.
Egypt’s foreign currency reserves stood at $14.42bn at the end of April – up from a 10-year low of $13.4bn at the end of March. The cash and gold reserves, critical for financing imports, were boosted by $2bn in cash deposits by oil-rich neighbouring Libya, according to central bank information cited on Wednesday by the state-owned Ahram newspaper’s website.
The Egyptian stock market’s benchmark EGX30 index advanced half a per cent on the news.
Without the Libyan deposit, Egypt’s foreign currency reserves would have dropped in value to $12.42bn between March and April, suggesting deteriorating fiscal health. Reserves fell only $100m between February and March after dropping $1.4bn from January to February.
Even as foreign currency from tourism and investment dwindles, the country’s public salary bill has ballooned, taking up an increasingly large chunk of state expenditures.
Egypt’s foreign reserves include gold, which has also diminished in value in recent weeks.
Egypt is in dire need of foreign currency to pay for imports of fuel, food and especially wheat, which it sells to consumers at subsidised prices – helping to maintain social stability in the country of 84m.
Egypt’s economy was severely weakened following a 2011 uprising that transformed the country’s political scene and upended its finances. Reserves have steadily dropped from a 10-year high of $36bn just before the revolution, which unleashed demands for higher wages, scared off domestic and foreign investors, discouraged tourism and exacerbated security woes.
Over the past two years, Cairo has been negotiating terms of a $4.8bn International Monetary Fund package that could release other international aid. But talks have stalled over disagreements between the government of President Mohamed Morsi and the IMF over spending cuts and tax increases.
The talks appeared to break down last month after Libya agreed to inject cash, and Qatar committed to $3bn in financial aid to keep the nation afloat.