Egypt’s net foreign reserves increased slightly for the second month in a row last month as the North African country awaits the increase in foreign financing after it secured an International Monetary Fund (IMF) financing deal.
Central Bank of Egypt (CBE) said in a statement Thursday that the figure reached $33.4 billion in October, up from $33.2 billion a month earlier. The latest climb since September comes after five months of non-consecutive declines this year after the war in Ukraine sent Egypt’s import bills for food and fuel soaring as inflation skyrocketed to its highest since late 2018.
According to Bloomberg, foreign investors have pulled $22 billion from the local debt market since March.
Last week, the IMF reached a preliminary agreement with the Egyptian authorities, paving the way for the Arab world’s populous nation to access a $3 billion loan with as much as $5 billion more expected to come from international partners.
The deal came as Egypt sharply devalued its currency for the second time in 2022 and announced new flexibility in its exchange rate, signalling a shift from practices that kept the pound stable by using foreign reserves.
“A switch to a flexible exchange rate regime for the Egyptian pound improves the longer-term stability for the economy, as the currency should be working more like an external shock absorber,” economists analyst UBS Group said in a note. UBS expects the pound to become attractive once markets settle in the new system and the global monetary tightening impetus fades.
Egypt also secured more than $22 billion in deposits and investments pledges from Saudi Arabia, the UAE and Qatar to shore up the North African country’s economy as the government has been ramping up efforts to fight inflation.