The Central Bank of Egypt (CBE) announced on Tuesday that Egypt’s net international reserves reached $40bn in March, down from $45.5bn in February, amid global economic shocks.
The CBE said in a press statement that Egypt’s continued increase of foreign exchange reserves over the past three years exceeded $45bn earlier this year, for the first time in the history. The latest figures will protect the national economy from a downturn, and maintain its stability.
To preserve the local market’s solidity amid turbulent global economic conditions, the CBE directed about $5.4bn of its foreign exchange reserves to cover its hard currency needs, especially for importing strategic goods. The allocation was also aimed at bridging the gap caused by the decline of foreign direct and portfolio investments and paying off international obligations related to the external debt.
The CBE added that this liquidity financed major national projects, as well as the industrial, agricultural, and service sectors’ needs. It is also aimed at supporting cross-sector local production and creates more job opportunities.
Egypt’s international reserves had recorded unprecedented levels of $45.510bn in February. According to the CBE, despite the fall in international reserves, it is enough to cover eight month of commodity imports, exceeding the international standard of three months.
These results confirmed that the state supported economic reform programme has formed a solid wall against the most severe global crisis caused by the coronavirus pandemic, the statement said.
The CBE stressed that it would keep tracking the global, regional, and internal changes in light of the ongoing crisis, and that it would take any measures that would preserve the Egyptian economy.
Egypt’s international reserves consist of foreign currencies, gold, special drawing rights (SDRs), and net loans to the International Monetary Fund (IMF).
According to the detailed data on the foreign reserves, the balance of foreign currencies decreased by about $5.334bn to about $36.399bn in March, compared to $41.733bn in February. The value of the gold reserves also decreased by about $70m to about $3.518bn, compared to about $3.588bn, while the SDRs reached $193m, up from $192m. As for the IMF loans, they reached $2m.
The CBE’s previous decision to liberalise the local exchange rate contributed to the increase in foreign exchange reserve, as it has increased by over $25.5bn since October 2016, when it recorded $19.5bn.
Egypt’s access to strong cash flows and loans from abroad has also contributed to an increase in the foreign reserves, most notably the $12bn IMF loan.
The aim of the reserve is to support the local currency, fulfil the country’s foreign obligations, and cover imports of basic commodities for several months. Most of the Egyptian foreign reserves consist of the US dollar, the euro, the British pound, and the Japanese yen.
The size of the reserves of any country represents a source of strength or weakness according to its value and its ability.
The revenues of the Suez Canal, tourism, and export, in addition to foreign investment and remittances are the most important resources of Egypt’s foreign reserves.