Daily News Egypt

Gulf states provide Egypt with $6bn to support foreign reserves - Daily News Egypt

Advertising Area




Advertising Area



Gulf states provide Egypt with $6bn to support foreign reserves

Egypt's foreign exchange reserves have been bolstered with $6bn from Saudi Arabia, the UAE, and Kuwait since Al-Sisi’s term began two years ago


The foreign exchange reserves at the Central Bank of Egypt (CBE) have experienced harsh fluctuations since President Abdel Fattah Al-Sisi was sworn in two years ago.

Foreign reserves were $16.6bn in June 2014 and jumped to $20bn, benefiting from Gulf aid. This sum decreased to $17.5bn in May due to the CBE’s obligation to provide requirements of foreign currency for imports in light of the lack of the state’s US dollar resources which were affected by the decline in tourism and foreign investment.

Egypt’s foreign exchange reserves have been bolstered with $6bn from Saudi Arabia, the UAE, and Kuwait since Al-Sisi’s term began two years ago.

This financial support was pledged by the three countries during the economic conference held in Sharm El-Sheikh in March 2015. This sum was presented as deposits to the CBE in April 2015.

When Al-Sisi took office in June 2014, the Egyptian foreign exchange reserves were $16.687bn, which could cover the cost of commodity imports for a period of 3.3 months. In April 2015, the foreign reserves jumped to $20.525bn owing to the deposits of Saudi Arabia, the UAE and Kuwait. Foreign reserves had reached $20.082bn at the end of Al-Sisi’s first fiscal year (FY) in June 2015.

After the Gulf’s financial support stopped and due to the CBE’s obligation to inject US dollar liquidity in the market to cover importing commodities, the foreign reserves began to decline again and fell to $17.52bn in May 2016, only one month before the end of Al-Sisi’s second year in office. The current foreign reserves can cover the cost of commodity imports for almost 3.6 months, according to the latest figures announced by the CBE.

Governor of the CBE Tarek Amer said in previous statements to Daily News Egypt that the CBE’s recent policies and measures have helped to maintain the reserves rate at safe levels.

Among these measures taken by the CBE was lifting the limit on deposits and withdrawals of foreign currencies, as well as decreasing the value of the pound by about 14%.

According to Ezz El-Din Hassanein, banking expert and general manager of a private bank operating in the Egyptian market, Egypt’s foreign exchange reserves have suffered since the 25 January Revolution in 2011 due to the lack of state resources of foreign exchange.

The foreign reserves depended on aid and deposits granted by some Gulf countries, led by Saudi Arabia, the UAE, and Kuwait during the past few years, he added.

“The shortage of foreign reserves has limited the CBE’s ability to intervene in the market and support the Egyptian pound against the dollar. It also limited its role in providing the needs of importers of the US currency. This led to significant activity in the informal market and increased the value of dollar against the pound,” according to Hassanein.

Despite the lack of state resources of foreign exchange, Amer expects that foreign reserves will rise to $25bn by the end of this year.

The CBE expects almost $4.5bn from Saudi Arabia and the UAE in the coming period, of which $2bn is provided by the UAE, and $2.5bn from Saudi Arabia.

The CBE also expects more foreign liquidity from the World Bank and the African Development Bank, on which the CBE had agreed in December 2015.

Egypt’s foreign exchange reserves need dollar liquidity urgently, as the country is facing major challenges including the repayment of external debt and covering import requirements of dollars locally.

The CBE will repay in July the second instalment of the Paris Club’s debts, amounting to $700m.

It is also scheduled to repay the dollar bonds worth $1bn bought by Qatar earlier.

The CBE provides $475m every month to banks so as to cover its customers’ needs of US currency through regular weekly auctions. This is besides the foreign exchange at exceptional bids which are raised from time to time.

The current foreign exchange reserves at the CBE consists of $13.801bn as foreign currencies liquidity, $2.513bn of gold, $1.180bn representing Special Drawing Rights (SDRs), and $52m of loans from the International Monetary Fund (IMF).

Advertising Area

Advertising Area



https://www.dailynewsegypt.com/2016/06/08/gulf-states-provide-egypt-6bn-support-foreign-reserves/
Breaking News

No current breaking news

Subscribe to the Newsletter List Subscribe by clicking on the Subscribe
Subscribe
Daily News Egypt Android App Available for free download on Google play
View
Daily News Egypt Ios App Available for free download on APP Store
View