The Central Bank of Egypt (CBE) reports a decline of 12.08% in the country’s foreign exchange reserves to $40 billion between March and February this year.

CBE says this decline is linked to higher foreign exchange requirements to ensure strategic imports as well as the payment of international financial obligations related to the State's external debt. Also, foreign investment has fallen.

However, the current level of foreign exchange reserves covers about 8 months of Egypt's commodity imports, higher than the world average of about 3 months of commodity imports.

Egypt's foreign exchange reserves are mainly denominated in US dollar, Euro, Australian dollar, Yen, and Yuan. A few years ago, Egypt went through an acute currency crisis causing a shortage of dollars and a significant drop in foreign exchange reserves. By September 2016, these reserves fell to the critical threshold of $19 billion.

To remedy the situation, authorities implemented several reforms including the introduction of taxes, such as value-added tax (VAT), and the reduction of energy subsidies, to reduce the budget deficit. In that framework, the country signed a three-year economic and financial program supported by the Extended Credit Facility (ECF) totaling $12 billion with the International Monetary Fund (IMF). This has enabled Egypt's foreign exchange reserves to rise again since then.

André Chadrak