Egypt’s foreign reserves declined at the fastest pace in more than two years after repaying debt and funding a widening trade deficit.
North Africa’s biggest economy saw its net international reserves drop 7.7 percent last month, the most since January 2013, to $18.5 billion, the central bank reported on its website. Egypt repaid $667 million to so-called Paris Club creditors and lost $155 million in a revaluation of its gold assets, the data shows. Central bank officials couldn’t immediately be reached for comment.
Egypt’s reserves have struggled to recover to pre-Arab Spring levels. While infrastructure spending has helped economic growth rebound, tourism and foreign investments remain below the levels seen before the ouster of President Hosni Mubarak in 2011.
The pace of the drop “is not reassuring,” Hany Farahat, senior economist at Cairo-based CI Capital, a unit of the country’s biggest listed lender, said by phone. “I would not be surprised if it’s attributed to the deterioration in the trade balance, which in our view is becoming a concern to growth.”
Reserves now cover 3.6 months of imports, according to Bloomberg calculations. That’s down from four months in April when reserves rose to an almost four-year high on the back of $6 billion in cash aid Egypt received from Persian Gulf allies.
The central bank has weakened the Egyptian pound by 8.7 percent since the start of the year, making it the third-worst performer in the Middle East and North Africa. The nation’s imports outweighed exports by $29.6 billion in the first nine months of the last fiscal year, according to the most recent central bank data. That’s 23 percent more than a year earlier.
The government’s Eurobonds due in 2025 fell for a second day, sending the yield up two basis points to 6.18 percent as of 4:10 p.m. in Cairo. That compares with a yield of 6 percent when they were sold in June.