The Central Bank of Egypt (CBE) announced that International Foreign Reserves (NIR) dropped at the end of December 2013 to register $17.05bn, down from $17.76bn in November. This is the fourth consecutive drop witnessed in the foreign reserves since August.
Foreign reserves reached $18.916bn at the end of August, only to decline to $18.7bn in September followed by another descend in October, where they reached $18.59bn. By the end of November, foreign reserves stood at $17.76bn.
Finance professor Alaa Mostafa said that the repetitive drop in foreign reserves can be attributed to unbalanced income and government expenditures.
“Egypt’s expenditure is higher than the income it’s currently receiving,” Mostafa said, adding that “we [Egypt] have a need to import strategic goods but the income has not picked up yet”.
“The deterioration in tourism has played a role in low-income conditions,” Mostafa added.
Angus Blair, the CEO of Signet Institute, said that the continuous decline is “normal”.
“Egypt has run a trade deficit for over 20 years,” Blair said.
Commenting on the Balance of Payments (BOP) surplus Egypt witnessed between July and September, of the fiscal year 2013/2014, Blair said that “we have to look at the long-term picture”.
Earlier last month, the CBE announced that the BOP registered an overall surplus of $3.7bn. The surplus was a significant improvement from the $518.7m loss made during the same period last year.
The bank added that although the current account increased to reach $757m, compared to $1.3bn deficit during the same period last year, the service surplus fell dramatically from 1.6bn to 135.8m, a 91.8% drop.
Mostafa claimed that the future of the bank will continue to be dependent on the political developments that are expected to take place during the upcoming two months.
On 14 December, interim president Adly Mansour announced that the referendum will take place over two days on 14 and 15 January. Over the past two weeks, violence has escalated in Egypt .On 24 December, an explosion in the Daqahleya Security Directorate in Mansoura resulted in 16 deaths. Another protest that took place on 3 January left 14 dead and 62 injured.