$2 billion dip in foreign currency reserves points to Egypt’s reliance on unsustainable investments

Source: Madamasr

Author(s): Beesam Kassab

Original Link: https://madamasr.com/en/2019/01/18/feature/economy/2-billion-dip-in-foreign-currency-reserves-points-to-egypts-reliance-on-unsustainable-investments/

When the Central Bank of Egypt posted monthly macroeconomic figures for the month of December last week, there was a surprise: Egypt’s foreign currency reserves had dropped for the first time since the government and the International Monetary Fund (IMF) agreed to a US$12 billion loan.

According to CBE data, foreign reserves increased from $16.687 billion in 2013/2014 to $44.259 billion in 2017/2018, before dropping by $2 billion to $42.550 billion by the end of December 2018. Over the same period, external debt rose from 15.1 percent of the GDP to 37 percent.

The initial reasons circulated for the dip in reserves pointed to the IMF’s decision to delay the delivery of the fifth tranche of the loan agreed to in the November 2016 deal. According to press reports, the delay by the IMF was due to Egypt’s delays in implementing an automatic price indexation mechanism on fuel, which would allow the government to lift fuel subsidies in Egypt and reflect international gas prices, as per Egypt’s agreement with the IMF.

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