Egypt’s net foreign reserves fell by the end of July 2016 11.45% month-on-month to $15.54 billion from $17.55 billion, according to the Central Bank of Egypt.
On an annual basis, net reserves slid 16.2% year-over-year, registering so the lowest level since March 2015.
According to MubasherTrade Research, this steep decline was driven by $1.017 billion Qatar's holding of Egyptian sovereign Eurobonds, $714.43 million installments to the Paris Club, and the $250 million first tranche of the Libyan deposit with the CBE.
Accordingly, the CBE holdings of foreign currencies and SDRs went down to c$12 billion and $0.79 billion respectively. On the other hand, a 5.1% month-on-month increase in the value of CBE's gold to $2.74billion could not offset the aforementioned decline.
“We reiterate that more signs of the mounting pressure on Egypt's external sector means that more exchange rate flexibility is inevitable. Moreover, we believe that July's figure will keep the EGP extremely vulnerable to more speculative attacks in the coming days”, said Ramy Oraby, Economist at Mubasher International
This pressure is forecast to temporarily be eased either by reaching a staff-level agreement with the International Monetary Fund by mid-August or by receiving financial aids promised by Saudi Arabia and the UAE, the report concluded.
