Foreign reserves drop in October, says CBE

Egypt’s foreign currency reserves fell from US$18.7 billion in September to US$18.2 billion in October, the Central Bank of Egypt (CBE) said on Thursday.

The privately owned newspaper Al-Masry Al-Youm (AMAY) quoted banking analyst Ahmed Adam as saying the decline is an expected reaction to the government's recent decision to import essential commodities.

The drop in reserves is in no way related to the CBE’s return of a US$500 million deposit to Qatar, Adam claimed. “The effect of that [transaction] may appear in next month’s assessment,” he added.

CBE Governor Hesham Ramez said earlier that the bank would return Qatar’s total US$2 billion deposit over two installments, AMAY noted.

"The main sources of foreign reserves are exports, tourism and the Suez Canal, two of which are severely weak," but at the same time, demand for foreign currency continues to rise for import purposes, Mohamed Rahmy, an economic analyst, told Mada Masr.

"Installments of Egypt's debt are also paid in foreign currency," he added.

"Increases in foreign reserves are directly related to political and economical stability," Rahmy explained. According to the economist, the reserve has to cover five to six months’ worth of food exports.

"When the reserve drops drastically, stern measures are [usually] adopted, but Egypt is not there yet — especially because such measures may decrease the investors' trust in the economic system, which is not needed now," Rahmy concluded.