Egypt's Foreign Reserves Drop and Qatar might have something to do with it
Net International Reserves dropped to $18.59bn at the end of October 2013, according to an official statement issued by the Central Bank of Egypt (CBE).International Reserves dropped to $18.59bn at the end of October 2013, according to an official statement issued by the Central Bank of Egypt (CBE). This is a 0.6% drop compared to the reported EGP 18.7bn at the end of September 2013.
CEO of Signet Institute Angus Blair said that this decline should not come as a surprise. “Egypt has a long term deficit and now it has a low foreign direct investment. This is to be expected,” he said. In August, international reserves rose, registering $18.91bn; the boost is mainly attributed to the aid received from the Gulf countries.
However, reserves have witnessed a subsequent decline during the past two months.
At the start of November, the bank returned a $500m deposit to Qatar after Qatar refused to renew it upon its maturity, Reuters reported last Wednesday.
The returned deposit is expected to be reflected in the November bank statement.
“Assuming no other [funds are] coming in terms of support from Gulf countries or no large foreign direct investments are made, then we can expect to see a further decline in foreign reserves,” Blair added.
CBE Governor Hisham Ramez announced earlier in October that a $2bn deposit will be returned to Qatar in the coming months and interim Prime Minister Hazem El-Beblwai said that Kuwait will allow Egypt a five year period rather than the initial one year to return the $2bn deposit it had given the cash-strapped government.
On 31 October, CBE stated that the Monetary Policy Committee (MPC) decided to keep the overnight deposit rate at 8.75 % and the overnight lending rate at 9.75%. The bank also stated that the rate of main operation and the discount rate will remain unchanged, standing at 9.25%.
“The MPC will continue to closely monitor all economic developments and will not hesitate to adjust the key CBE rates to ensure price stability over the medium‐term,” Sub Governor at the Monetary Policy Rania Al-Mashat said in a statement.
In September, the bank cut the overnight deposit rate, overnight lending rate, main operation’s rate and the discount rate by 50 basis points.