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Gulf funds push foreign reserves to highest levels since November 2011

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Egypt’s net reserves reached $18.9bn in July, up $4bn from the month earlier, as Gulf aid pledged to the cash-strapped country started flowing in.

Egypt's net reserves reached its highest levels since November 2011, propelled by incoming foreign aid

Egypt’s net reserves reached its highest levels since November 2011, propelled by incoming foreign aid

By Raghda Halal

 The Central Bank of Egypt has announced that the country’s foreign currency reserves increased by $4bn over the last month to $18.9bn.

These are the country’s highest recorded rates since November 2011, after the country suffered huge losses following the outbreak of the January 25th Revolution.

These results follow aid packages to Egypt from a number of Arab Gulf countries, who sought to provide support to the country’s new government after the ouster of former president Mohamed Morsi last month.

Fakhri Al-Fekki, economics professor at the faculty of economics and political science at Cairo University, and chairman of the economics committee within the Al-Wafd Party, said Egypt’s foreign currency reserves increased as a result of the United Arab Emirates (UAE) recent $2bn deposit with the Central Bank.

The grant came in the form of petroleum products, which has helped Egypt’s Suez Canal reap increased revenues, which will be used to support the country’s public budget and in turn increase the country’s foreign currency reserves.

He expected such rates to increase over the coming months.

These increases occurred despite a recent payment instalment made by the Central Bank of $669m to the Paris Club finance organisation.

Mervat Francis, chairman of the treasury department at the Ahli United Bank (AUB), attributed the expected increase in foreign reserves to $18.88bn by the end of 2013, to the $5bn in deposits provided by the UAE and Saudi Arabia to the Central Bank.

Such increases in reserves have been expected since the announcement of Gulf Arab countries of their support for Egypt following Morsi’s overthrow, however are contingent upon the preservation of economic stability within the country.

Hisham Ramez, governor of the Central Bank said there did not currently exist any obstacles with regards to the implementation of Kuwait’s planned $4bn aid package to Egypt announced last month.

He expected that the transfer of Kuwaiti funds would take place shortly, saying that no final deadline had been imposed for the transfer of the funds. “The Kuwaitis still have not informed us of a specified date for the transfer of their funds.”

He added: “Procedures will be taken by the Kuwaiti authorities to transfer the money that they have promised and no more, and there do not currently exist any problems with the implementation of the transfer”.

He did not specify the nature of these procedures; however Kuwaiti sources stated that the aid would be split into three parts, the first part being made up of $1bn in non-refundable grants, an amount that would not need to be first approved by the Kuwaiti National Assembly. The second part would consist of $2bn in oil derivatives, with the third part taking the form of an interest-free cash deposit provided to the Central Bank for the purpose of increasing the country’s foreign currency reserves. The last two parts of the aid package would also not need to be approved by Kuwait’s National Assembly.

 

Translated from Al-Borsa 


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