Gold value listed in FX reserves growth curbs reserves decline in December 2018

Hossam Mounir
3 Min Read

The increase in the value of gold listed in the foreign exchange (FX) reserves at the Central Bank of Egypt (CBE) curbed the fall in the value of total reserves during December 2018.

On Monday, the CBE disclosed that its FX reserves had declined by about $1.963bn at the end of December 2018 to $42.551bn against $44.514bn in November.

According to data obtained by Daily News Egypt, foreign currencies listed on the reserves declined by $2.068bn in December to $39.242bn from $41.31bn in November.

On the other hand, the value of the gold assets included in the reserves rose during December by $104m to $2.716bn against $2.612bn in November.

Special drawing rights (SDRs) reached $586m in December, growing from $580m in November.

SDRs are an international reserve asset developed by the International Monetary Fund (IMF) in 1969 to complement the official reserves of member countries.

The value of the SDRs is determined by a basket of five major currencies, namely the US Dollar, the Euro, the Japanese Yen, the British Pound, as well as the Chinese Yuan which has been included in the basket of currencies as of 1 October 2016.

The value of Loans to IMF reached $11m down from $14m in November.

The decline in FX reserves is the first since the exchange rate was liberalised in 2011.

Despite this decline, reserve balances are still at one of the highest levels recorded by the CBE, covering about eight months of imports of basic commodities, which is higher than the global minimum of three months.

While the CBE did not mention the reasons for the large drop in reserves, a senior official at the bank said in a press statement on Monday that the decline was due to the bank paying the treasury bills to foreign investors and the interest of foreign debts.

He added that the CBE has also used part of its reserves to pay external liabilities owed by ministries and government agencies.

Analysts predicted that the value of the fifth tranche of the IMF loan worth $2bn will arrive this month, which would also boost FX reserves again by the end of January.

The CBE had ended the mechanism of transferring funds of foreign investors in local securities starting from 4 December 2018, which included new treasury bills (T-Bills) and bonds, as well as shares only listed on the Egyptian exchange, while investment now can move in and out through the interbank market.

On Sunday, the CBE sold one-year dollar-denominated T-Bills, due on 7 January 2020, worth $854.1m bearing an average interest rate of 3.797%.

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