Egypt’s net international reserves recorded $40.2bn in February, up from the $40.1bn in January 2021, the Central Bank of Egypt (CBE) revealed on Sunday.
Egypt’s international reserves consist of foreign currencies (FX), gold, special drawing rights (SDRs), and net loans from the International Monetary Fund (IMF).
The FX reserves increased by about $363m to $35.905bn in February, compared to the $35.542bn reported in January.
However, the gold reserves decreased during February by $144m to $4.140bn, compared to $4.284bn in January. The balance of SDRs also decreased by $118m to $161m in February compared to $279m in the previous month.
Banking expert Mohamed Abdel Aal believes that the increase in FX reserves during February, for the ninth month in a row, indicates that Egypt does not have any shortcomings in FX liquidity.
It also means that all international obligations and entitlements are paid on time, and that Egyptian banks meet all import appropriations for strategic goods.
Abdel Aal added that, importantly, the high reserves indicate that the traditional FX sources, with the exception of tourism revenues, are running within their natural rates.
He noted that this will enhance the exchange rate of the Egyptian pound in the short term to the price level of EGP 15.5 per US dollar.
The aim of the reserve is to support the currency, fulfil the state’s external obligations, and guarantee its imports of basic commodities for several months. The size of the reserve for any country represents a source of strength or weakness according to its value and ability to fulfil the state’s FX obligations.
The resources of the Suez Canal Authority, tourism, export, foreign investment and remittances of workers abroad are the most important resources that feed Egypt’s reserves.
It is noteworthy that despite the decrease in FX reserves by more than $6bn during 2020, it was able to withstand strongly in the face of the repercussions of the novel coronavirus (COVID-19) pandemic.
The steadfastness of the reserves in the face of 2020’s occurrences was supported by the CBE’s success in building it before the outbreak of the pandemic, scoring a record high at $45.510bn in February 2020.
CBE Deputy Governor Ramy Aboul Naga had indicated that the building of reserves at unprecedented levels before the crisis, and the widespread implementation of structural reforms, made the people of Egypt more prepared to face external shocks.