The Central Bank of Egypt (CBE) said in a statement on Sunday that the country’s net international reserves increased to EGP 40.980bn in January 2022, compared to December’s EGP 40.934bn — an increase of EGP 46m.
The CBE revealed that the value of foreign currencies included in the reserve also increased to $34.141bn in January, up from December’s $34.056bn.
Furthermore, the value of gold included in the reserves decreased in January by about $24m to reach $4.204bn, compared to the $4.228bn recorded in December.
The balance of special drawing rights decreased by $2.642bn in January as well, down from December’s $2.657bn.
Egypt’s reserves consist of foreign currencies that include the US dollar, the euro, sterling pound, Japanese yen, gold, special drawing rights units, and net loans from the International Monetary Fund (IMF).
The purpose of reserves is to support the currency, fulfill the country’s foreign obligations, and ensure imports of basic commodities for several months. The size of the reserve for any country also represents a source of strength or weakness according to its value and ability to meet the country’s foreign exchange obligations.
The resources of the Suez Canal Authority, tourism, export, foreign investment, and remittances of workers abroad are the most important resources of reserves in Egypt.
The IMF had expected, in a previous report, that Egypt’s net international reserves would recover thanks to the most important sources of foreign exchange achieving record levels in the coming years.
It expected that total reserves would record $44.1bn in FY 2021/22, and $47.6bn in FY 2022/23, as well as $51.8bn in FY 2023/24, and $55.1bn in FY 2024/25.
The steadfastness of the reserve came in the face of all the negative repercussions of the coronavirus, with the support of the success of the CBE in building it strongly before the emergence of the pandemic and reaching unprecedented levels, which is the highest ever in the history of Egypt.
The reserve reached about $45.51bn in February 2020, which contributed to increasing the CBE’s ability to support the state during the pandemic.
Mohamed Abdel-Aal, a banking expert, explained that the high cash reserve of foreign currencies in the CBE means that there is no shortage of foreign exchange liquidity and that all international obligations and dues are paid on time.
He added that Egyptian banks meet all import credits for strategic commodities, and most important of all, traditional foreign exchange sources are within their normal rates.
Abdel-Aal also expected Egypt’s foreign exchange reserves to witness further improvement during the coming period, noting that the growth of foreign investments in government debt instruments to range between $25bn-30bn worked to enhance the balance of net foreign exchange reserves, in addition to an increase in remittances from Egyptians working abroad exceeding $30bn.
Additionally, the increase in export quotas of some commodities, the continuation of achieving self-sufficiency, and the export of gas by about $3bn annually also helped, along with the improvement of the Suez Canal’s revenues.
He also pointed out that Egypt possesses a net foreign cash reserve that covers approximately seven months of Egypt’s import needs from abroad, outperforming the global average of four months, explaining that the main goal is not to increase the balance of net foreign exchange reserves, but maintain the average of the months covered.
