Foreign investments in Egyptian treasury bills (T-bills) recovered in January after nine consecutive months of decline.
According to CBE, foreign investments in T-bills in January climbed to EGP 233.8bn, an equivalent of nearly $13.20bn, compared to EGP 192.29bn, an equivalent of $10.70bn, at the end of December 2018, an increase of EGP 41.51bn ($2.49bn).
In in January, the price of US dollar declined to its lowest level since May 2018 losing over 30 piasters, pushed by the major increase in foreign exchange reserves at banks operating in Egypt, with the return of foreign investments in government debt instruments.
The National Bank of Egypt (NBE) and Banque Misr have both received over $2bn investment flow in January.
Foreign investments in Egyptian T-bills reached their highest level in March 2018 at EGP 380.3bn, an equivalent of $21.5bn.
Foreign investments in T-bills stood at nearly $11bn before 25 January 2011, however, it declined to less than $25m at the beginning of 2016.
Foreign investments in T-bills have returned strongly following the Central Bank of Egypt’s (CBE) decision to float the local exchange rate on 3 November 2016, with the major increases in the interest rates on the Egyptian pound that followed the decision. However, another decline in foreign investments in T-bills started in April 2018 affected by the crisis of emerging markets, which reduced the confidence of interest traders in the economies of emerging markets generally, including Egypt.
The CBE pointed out in an earlier report that foreign capital leaving emerging countries was the result of investors’ concerns over the future of economic activity growth in these countries, alongside with the instability of international trade policies and the restriction of the international financial situation, as well as the weakness of the economic structure in some emerging countries.
Near the end of November 2018, the CBE decided to terminate the foreign exchange repatriation mechanism for new portfolio investments starting 4 December 2018.
Tarek Amer, the governor of CBE, said at the time that the decision was planned since the flotation of the local currency, with the aim to direct foreign investments towards the banking sector.
The wave of foreigners exiting debt instruments has impacted net foreign assets at the banks operating in the local market, which funded a major part of exit operations, to cause foreign net assets in banks to record a deficit of about $7.33bn in November 2018.
The total value of existing government T-bill investments reached about EGP 1.37tn at the end of January, compared to EGP 1.30tn at the end of December 2018, with an increase of about EGP 70bn.
