Central banks across the world have lost over $175bn in foreign exchange reserves in under two months on the back of the ongoing coronavirus (COVID-19) pandemic.
In a study of foreign exchange reserve indicators in over 50 developing and developed countries, the Middle East News Agency (MENA) reported that in about 30 countries, cash reserves have significantly declined since the outbreak began.
This was most visible in China, which lost $46bn in March, with Turkey losing about 15% of its cash reserves, valued at $15.5bn, in one month.
The Wall Street Journal (WSJ) warned in a report that emerging markets, in particular, are now more vulnerable to further economic shocks following the coronavirus pandemic. This is particularly so as the virus has forced them to exhaust a large part of their foreign exchange reserves at the fastest pace since the global financial crisis in 2008.
The WSJ added that the foreign reserves of 12 of the largest developing countries, including Brazil and Russia, fell by a total of $143.5bn in March alone. It is the largest rate of decline since the outbreak of the global financial crisis twelve years ago.
It explained that these countries have used their foreign reserves to combat the decline in their currencies on the back of the coronavirus outbreak’s negative repercussions. The virus has brought the global economy to a virtual standstill since middle of March.
Bloomberg stated that the Central Bank of Egypt (CBE), as well as banks working in Egypt, have succeeded in overcoming the exit of foreign investments, exceeding $13.5bn, from the country.
Although this led to a $5.4bn decline in the CBE’s foreign currency reserves in March, this remained equivalent to only a third of the volume of outgoing funds. Bloomberg’s report highlights the Egyptian banking sector’s ability to face the crisis and deal with it, unlike many countries.