A senior government official who wished to remain anonymous told Daily News Egypt that the Central Bank of Egypt (CBE) received $4.5bn in January 2017, which has led to the country’s reserves of foreign currency to rise by about 8.6%, to $26.3bn at the end of January, up from $24.2bn in December 2016.
He added that, even though Egypt received $4.5bn, foreign currency reserves rose by only $2.1bn, as Egypt paid $2.4bn for external debts and entitlements of foreign oil companies operating in Egypt, as well as securing the country’s needs of fuel and goods.
Dollar inflows received by the CBE includes $4bn from proceedings of selling bonds in international markets, as well as about $500m from the second tranche of a loan from the African Development Bank, while Egypt awaits the second tranche of $1.250bn from the $12bn loan from the International Monetary Fund (IMF) on 15 March.
The source said that Egypt will work to increase its foreign exchange reserves in the coming period to reassure local and international businesses before they inject direct or indirect investments into the market. He noted that repayment for foreign obligations in the future will rely on surplus in trade balance and the proceeds of foreign investments in government bills.
He explained that Egypt has paid $2.4bn, dispersed between $700m to the Paris Club, along with a monthly premium of debts owed to foreign oil companies, totalling $3.5bn; in addition to payments for the purchase of fuel and as part of the repayment of the Libyan deposit.
Despite optimistic expectations for Egypt’s foreign exchange reserves, the IMF documents on the Egyptian loan expect the reserves to decline at the end of the current fiscal year (FY), in June 2017, to $22bn, before they bounce back up at the end of FY 2018/2019 to $33bn, eventually reaching $37.6bn at the end of FY 2020/2021.
The source believes that the pressure on the dollar in the coming period will be reduced, as Egypt is negotiating an agreement with Iraq to import 1m-2m barrels of crude oil for refining in Egypt, with potential increases in the future. This comes as part of Egypt’s efforts to offset the stopped Aramco shipments.
Additionally, the source said that the hard economic measures have already been taken, including the flotation of the Egyptian pound and hiking the fuel prices, adding that the current FY will not see further increases in fuel prices. He explained that even though the state is moving to partially reduce subsidy on fuel, it will not stop the subsidy scheme entirely, but would continue supporting low-income citizens in purchasing electricity and fuel.
With regard to rumours of a technical mission from the IMF to Egypt to review the developments of the economic reform program before disbursement of the second tranche, the source said that consultations with the IMF are periodic. “It is the same relation between any bank and client,” he stressed, clarifying that a mission had been visiting Egypt last week.