This drop is the first since May 2020, when Egypt’s NIRs started to recover from the pandemic outbreak.
CBE attributed this decrease to moves taken to counter the significant shocks to global markets amid the ongoing Russian-Ukrainian conflict.
“Conflict between the two countries has caused massive sell-offs in emerging markets, and volatility in global asset prices. In the wake of the Russia/Ukraine crisis and in line with the CBE’s mandate to maintain price stability, the CBE decided to temporarily mobilise its excess foreign currency reserves to calm the markets during periods of exceptional stress caused by exogenous factors, similar to the actions that were taken during the emergence of the COVID pandemic,” CBE explained.
It added that this mobilisation targeted covering substantial foreign investor outflows and partially covering local demand so as to ensure the availability of imported strategic goods and to repay external debt obligations in a timely manner.
However, NIRs remain at ample levels, covering more than five months of imports, exceeding global reserve adequacy measures, said CBE.
CBE asserted it will continue to monitor global developments, pledging to take all measures as deemed necessary to achieve its mandate.
Egypt will suffer declined tourism inflows, higher food prices and further financing challenges owing to the Russian invasion of Ukraine, which amplifies the country’s vulnerability to outflows of non-resident investment from its local-currency bond market, Fitch Ratings said in a recent report.
Responding to the crisis, CBE raised key interest rates in March by one percent (100 bps) as well as increasing US dollar price against the Egyptian pound to its highest level in five years.
Moreover, Egypt is in talks with the International Monetary Fund (IMF) to design a new programme in order to support the country’s second wave of reforms, kicked off in 2021, amid the ongoing challenges and to preserve the gains of the first reform wave.
Furthermore, Egypt issued its first-of-a-kind Samurai bonds, which are Japanese-dominated bonds that target the Japanese market to diversify its investors base.