Egypt’s foreign reserves resumed a steep decline that began last year when a popular uprising sent the economy into a tailspin and led the central bank to start selling dollars to prop up the country’s pound.
Reserves fell last month to $14.42 billion from $15.53 billion in June, according to central bank figures released on Tuesday.
They were pulled lower by the government’s repayment of a $1 billion euro bond and a $607 million payment to Paris Club lenders, the bank said on its website.
Reserves have plunged by well over half since January 2011, the start of the political turmoil that has scared away tourists and investors, two of Egypt’s main sources of foreign currency.
The central bank has drained much of its foreign currency to avert a sharp decline in the Egyptian pound and avoid the risk of exacerbating inflation.
Many foreign investors say fear of a sharp fall in the pound should pressure on the beleaguered economy grow in coming months is the main reason that they are avoiding Egypt for now.
Strains on Egypt’s finances and a lack of foreign debt buyers have sent domestic state borrowing costs soaring in the past year and, with foreign commercial borrowing not an option for now, Egypt needs to secure aid from foreign donors and the International Monetary Fund.
Reserves, at $36 billion before last year’s uprising, dropped steadily until this March. They then rose over the following three months - with Saudi Arabia buying government bonds and depositing $1 billion in Egypt’s central bank - before dipping again in July.
With little sign of a significant pick-up in foreign direct investment (FDI) and tourism, downward pressure remains.
“We are yet to see any rebound in the key sources of foreign currency to the country. Tourism is still suffering and FDI is still low relative to the pre-revolution levels,” said Youssef Kamel, a Cairo-based analyst with Rasmala.
A new government sworn in last week needs to show broad backing at home for any economic reforms to secure a long-awaited $3.2 billion emergency loan from the IMF.
The IMF said on Sunday it would send a mission to Cairo this month to hold talks on loans to Egypt.