Reasons behind Egypt's record of foreign reserves to above $37B

CAIRO - 3 January 2018: Egypt's international reserves hit an unprecedented level in December as it recorded $37.019 billion, according to the Central Bank of Egypt's (CBE) announcement on Wednesday.

The record came as a result of improving sources of foreign currency, such as exports and remittances of Egyptians abroad, an official source in the CBE told Egypt Today.

Dollar inflows from Egypt’s six main sources of foreign currency doubled during the first three months of current fiscal year (FY) 2017/18 to $24.9 billion from $12.7 billion during the same period of FY 2016/17, according to official data issued by the CBE in December.

Foreign investment in securities reached $7.5 billion in Q1 of FY 2017/18 comparedto $841 million during Q1 of past FY.

Remittances of Egyptians abroad continued to hike after the flotation as it registered $5.9 billion in the first quarter, compared to $4.3 billion in the same period last year.

Tourism revenues also climbed up to $2.7 billion from $758 million during first three months of FY 2016/17. Meanwhile, the Suez Canal revenues kept the same level at $1.4 billion.

Egypt achieved a $5.1 billion in surplus in the balance of payments (BOP) in Q1, compared to $1.9 billion in the corresponding quarter in FY 2017/18.

Foreign reserve has been increasing since the government sealed the IMF loan deal in November 2016, to reach the current level compared to $19.041 in the month before the float, marking the highest foreign reserve level since the January 25 uprising.

The CBE has helped Egypt mitigate its foreign currency shortages by stabilizing exchange rates and eliminating the parallel dollar market, the IMF had said in its review. The government has already secured its $2 billion financing gap for fiscal year 2017/18 through multilateral and bilateral financing, according to the IMF.

The gap was funded through $1 billion from the World Bank, $350 million from the African Development Bank (AfDB) and $600 million from G7 countries, the IMF said.

In addition to this, the banking sector has collected $47 billion since the flotation from foreign trade transactions, CBE’s sub-governor Tarek Fayed said in September. Egypt also issued $7 billion in Eurobonds in January and May 2017 on the global bond market, which were both oversubscribed, according to the Ministry of Finance.

The flotation of the Egyptian pound has also come in favor of Egyptian exports as the industrial sectors have witnessed notable development in that regard.

The Egyptian industries were the first beneficiary from the economic reform program, as it contributed to increasing the dependence on the local products instead of the imported ones.

In fact, the deficit in the trade balance fell by $12.23 billion (37 percent) in the first eight months of 2017, to stand at $20.1 billion, compared to $32.4 billion in the same period in 2016.

Data released by the Ministry of Trade in October showed that non-petroleum imports declined by 23 percent to reach $35.1 billion, down from $45.5 billion in the same period last year.

Meanwhile, non-petroleum exports in that period increased in the period between January and August by 11 percent to register LE 15 billion, compared to LE 13.5 billion in the same period last year.

Moreover, a pickup in foreign direct investment (FDI) was seen as a sign of being on the right track toward restoring confidence in the Egyptian economy, bolstering job creation and sustain- able growth.

Egypt’s net FDI increased to $13.3 billion in the last fiscal year, ending in June 2017, compared to $12.5 billion in the previous fiscal year, with a 6.5 percent increase, the CBE said in its annual bulletin.