Egypt's net international reserves fell in July after inching up for three months in a row. Figures from the Central Bank of Egypt (CBE) published on Tuesday showed that Egypt's foreign currency reserves stood at some $14.42 billion by the end of July, down from $15.53 billion in June.
The CBE said on its website that the fall was due to maturing Egyptian bonds and payment of the Paris Club member countries' debt totaling some $1.64 billion.
Hani Genena, head of research at Pharos investment bank, pointed out that Egypt repays about $600 million each trimester in debt premiums.
"In addition, Eurobonds launched in 2007 were due in July," he said. "But the main buyers are local banks like The National Bank of Egypt and Bank Misr, so this $1 billion won’t go out of the country."
"With the actual levels of reserves, we can defend our currency until the end of the year," Genena added. "The reasons for the sharp decrease last month are exceptional. Let’s assume that the $1-billion maturity bonds were not paid last month – foreign reserves would have fallen by only $100 million."
He expects coming months to be less volatile, barring unforeseen political turbulence.
Before last year's Tahrir Square uprising that unseated president Hosni Mubarak, the country's foreign reserves sat at around $36 billion. Subsequent political turmoil, however, served to frighten off tourism and foreign investment, two of Egypt's main sources of foreign currency.
Reserves followed a downward trend from March of 2011 until March of this year, when they began to register a slight improvement.
Genena believes that a loan from the International Monetary Fund will be needed by the end of the year in order to prop up Egypt's foreign reserves.
"We can avoid taking this loan only if we manage to restore security and stability immediately so that the tourist influx – especially Arab tourism – in Cairo can recover," he said. "Meanwhile, the government must guarantee that the exchange rate will remain stable to assure investors. If they succeed in doing these things, we won't need the loan."