Egypt’s foreign reserves jumped in July to their highest in 20 months, the central bank said on Monday, boosted by $5 billion that Gulf Arab states sent to Egypt after the army removed Islamist President Mohammed Mursi from power on July 3.
Reserves stood at $18.88 billion at the end of July, up from $14.92 billion a month earlier.
The figure is the highest since November 2011, but it nonetheless shows that Egypt continues to bleed foreign currency to defend the Egyptian pound.
“No surprises really, said Said Hirsh, an economist with London-based consulting firm Volterra Partners. “The only bad part of it is that without it, the situation would have been dire - over a $1 billion loss of FX reserves.”
Part of the drain was due to a payment of about $650 million Egypt had to pay in July to service Paris Club debt, according to another economist.
The country has run through more than $20 billion in reserves, borrowed billions from abroad and delayed payments to oil companies to support its currency since its popular uprising in early 2011 frightened away tourists and foreign investors and the dollars they brought with them.
“I read the latest reserves figures in a positive way, but also it shows the importance of Gulf Arab support,” said John Sfakianakis, chief investment strategist at MASIC, a Riyadh-based investment firm.
“Had it not been for Gulf Arab deposits the bleeding of FX reserves would have been steep and fast. The minus $1 billion of reserves should level off in the immediate period given that there is less need now for currency support.”
In the five weeks since Mursi’s removal, Egypt’s pound has appreciated marginally against the dollar on the official market, and much more substantially on the black market.
Dutch-based OCI NV sold $1 billion to the central bank for Egyptian pounds in July as part of its purchase of shares of its subsidiary OCI listed on the Egyptian stock exchange, it said in disclosure to Egypt’s bourse.
But the central bank put this into tier 2 reserves, which do not show up as official reserves, said Mohamed Abu Basha of EFG Hermes.
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