Last week’s foreign capital outflows reflect only 7-8% of total holdings: PM

Cairo – August 11, 2024: During the Prime Minister’s weekly press conference, PM Mostafa Madbouly assured the public that the foreign capital outflows or “hot money” withdrawn on Monday was relatively minor, amounting to just 7-8 percent of total holdings.  

The PM explained that while foreign investors pulled out of Egyptian treasury bills and moved their funds into US dollars amid fears of a US recession, the situation hasn’t had a major impact on Egypt’s economy.

Madbouly noted that this movement of capital was largely due to Egypt's flexible exchange rate policy, which allowed for high-value withdrawals.

Despite the concerns over regional political tensions and government finances, Madbouly assured that the Central Bank handled the situation with “utmost professionalism” and that the state's commitment to a flexible exchange rate remained firm “so that there are no negative repercussions”.

In light of the sell-off, the Ministry of Finance continued to accept interest rates on government debt instruments for the sixth time in a row since the new finance minister’s appointment.

In a recent tender, the yield on three-month Egyptian treasury bills increased by 0.5 percentage points to 27.65 percent, reflecting market adjustments. Foreign investments in Egyptian debt were reported to be over $34 billion last April.

The Egyptian Exchange (EGX) was affected last week by the outflows, losing around LE 56 billion in one trading day, however, benchmark index EGX30 was up by around 15 percent on a monthly basis.

Madbouly also highlighted that the country’s cash reserves cover eight months of economic stability, asserting that foreign currency sources inside Egypt are stable and that the state’s main requirements are secured.

The PM also emphasized the government's efforts to support the industrial sector through subsidized financing, including a renewed initiative to provide up to LE 120 billion pounds in soft loans for agriculture and industry at an interest rate of up to 15 percent.

The Egyptian economy, despite recent external challenges, has shown a strong trend of recovery in 2024, including a 2 percent increase in its manufacturing output index between February and May, as well as its Purchasing Manger’s Index (PMI) climbing to a three-year high of 49.9 in June.

Egypt’s annual inflation rate fell for the fifth month in a row, slowing to 25.2 percent in July 2024 from 27.1 percent in June, with annual urban inflation decelerating to 25.7 percent in July from June’s 27.5 percent.