Egypt Says Remittances, Foreign Inflows Jump After Floatby
Transactions show confidence in economy after currency float
Foreign reserves at highest level in more than five years
Remittances from Egyptians working abroad are surging and foreigners bought more than $250 million in local assets on Sunday alone, further signs of growing confidence in the nation’s economy after it floated the currency and secured a $12 billion IMF loan.
Expatriate workers sent home $4.6 billion in the fourth quarter of 2016, up 12 percent from a year earlier, and most of it transferred after the pound was floated on Nov. 3, the central bank said in a statement on Tuesday. Rami Aboul Naga, assistant sub-governor at the bank, told Bloomberg News separately that most of Sunday’s foreign inflows were in local-currency debt.
“In the past few weeks, we’ve been seeing persistent and growing inflows across equities and fixed income,” Aboul Naga said late on Monday.
Foreign investors have been gradually returning to Egyptian assets since currency controls were abandoned in an effort to end a crippling foreign-currency shortage and help secure IMF assistance. Foreign holdings of T-bills grew to 10.2 billion pounds ($552 million) in December. That’s up from 989 million pounds in October, which translates into $111 million in pre-float terms and half that amount in today’s terms.
“Investors were testing the waters in November and December with small investments. Now we’re seeing relatively bigger tickets,” said Mohamed Abu Basha, an economist at EFG-Hermes, the Arab world’s largest investment bank. “Now we can say investors are becoming more convinced by Egypt’s story.”
Yet foreign holdings in Egyptian debt remain very low, suggesting there is “plenty of potential for more inflows,” Abu Basha said. Foreigners held about 60 billion Egyptian pounds worth of T-bills before the 2011 uprising against President Hosni Mubarak.
The newfound confidence in the economy was demonstrated last month when Egypt sold $4 billion in international bonds at a lower cost than initial guidance, having attracted bids worth more than three times the amount raised. The sale ensured that Egypt covered its funding gap this year, boosting confidence in the Egyptian pound, Abu Basha said.
Foreign reserves also rose to $26.4 billion in January, their highest level in more than five years. Aboul Naga said they now cover 5.7 months worth of imports.
The pound has lost more than half of its value since the November float, trading at about 18.22 to the dollar on Tuesday. Egypt’s benchmark EGX30 index for stocks has surged by 53 percent in local currency terms in the period.
The growing foreign demand for Egyptian debt also helped to reduce yields, Abu Basha said. The average yield on 9-month T-bills fell by 1.06 percentage points on Sunday to 18.86 percent, its lowest level since mid-December.