Central Bank of Egypt reveals 2011/12 forex expenditures

Ahram Online, Thursday 31 Jan 2013

CBE says it provided fleeing investors with almost $13 bn in wake of 2011 revolution, attributes eroding foreign currency reserves to petroleum, food imports

An Egyptian policeman directs the traffic in front of the Egyptian Central Bank offices in Cairo, Egypt, Sunday, Jan. 6, 2013 (Photo: AP)

The Central Bank of Egypt (CBE) on Wednesday announced for the first time how injections of foreign currency made in 2011 and 2012 – the two years following Egypt's revolution – were allocated.

The CBE has issued a report indicating that it made a total of $36 billion available for four major spending items during the period in question, including purchases of petroleum and wheat. The bank provided $21 billion in 2011 alone, half of which was intended to cover capital flight.

Almost $13 billion were allocated for foreign investors who left the Egyptian market in the wake of the Tahrir Square uprising in early 2011. Since then, Egypt has not put any restrictions on investment outflows, so the CBE provided the necessary foreign currency for investors wanting to exit the market.

The report also showed that Egypt's state-run petroleum authority received almost $9 billion for the same period, while Egypt's official wheat purchaser, the General Authority for Supply Commodities (GASC), was provide with some $5 billion. Roughly $8.5 billion, meanwhile, went towards debt servicing.

Since January 2011, Egypt's foreign reserves have dropped by $21 billion – in line with a rising balance-of-payments deficit – to stand at a current $15 billion.

"Due to ongoing political events and a 30 per cent fall in tourism revenues since 2010, the balance-of-payments deficit reached a total of $21 billion," the CBE's press statement explained. 

Government petroleum imports, as well as basic nutritional imports including wheat, were the main cause behind the drop in foreign reserves, the CBE noted.

The central bank recently announced a currency auction mechanism aimed at boosting Egypt's foreign reserves, which have within recent months reached critical levels.

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