Foreign reserves drop to US$15.33 bln in December

Egypt's foreign reserves have dropped yet again, plummeting to US$15.33 billion at the end of December, the Central Bank of Egypt (CBE) announced Tuesday.

At the end of November, reserves stood at US$15.882 billion, while they recorded US$16.9 billion in October.

The Ministry of Finance explained that November's steep drop in reserves was linked to the government's repayment of a US$2.5 billion Qatari deposit. During that month, the CBE received a US$1 billion grant from Kuwait and inflows of around US$400 million from the Suez Canal and tourism, but this was not enough to counterbalance to outflow of funds.

Neither the CBE or the Finance Ministry has released a public explanation for the December figure.

Egypt’s dwindling reserves are becoming a subject of increasing concern. 

According to CBE data for the first quarter of the current fiscal year, three months of imports amounted to US$16.2 billion. Global financial institutions regard having less in foreign reserves than is necessary to finance three months of imports as a sign of poor fiscal health. 

Egypt has not yet been penalized by credit ratings agencies for the reserves shortfall. In recent months, two of the major global credit rating agencies have raised Egypt’s score, citing subsidy cuts and a stabilizing economy. But analysts, including the head of a recent International Monetary Fund (IMF) mission to Egypt, have cautioned the government to work on building up its reserves.

As Egypt’s trade deficit widens and funds from the Gulf dry up, the situation could deteriorate. 

In January, Egypt is scheduled to make a US$700 million debt payment to the Paris Club, a consortium of creditor nations.