Egypt’s stronger foreign exchange reserve position is set to save the government at least LE30 billion in the current budget, according to quotes from Planning Minister Ashraf El-Araby published by state-owned news agency MENA on Tuesday.
FOREX reserves were reinforced since oil-rich Gulf nations pledged $12 billion in aid to Egypt following the ousting of Islamist president Mohamed Morsi in July, of which the central bank has so far received $7 billion, Reuters reported two weeks ago.
As a result of the cash injection, Egypt’s Net International Reserves (NIR) leaped by $3.9 billion in July 2013 to reach a total of $18.8 billion.
"The lowered interest rates will alleviate the government's borrowing costs, mostly on already sold short-term treasury bills and any bonds issued in the future," Hany Genena, chief economist at Pharos Holding, told Ahram Online.
"More stable foreign reserves resulted in investor confidence in government treasury bonds, which in turn allowed the central bank to cut interest rates," he added.
The Central Bank of Egypt lowered its main overnight interest rate by 50 basis points in August, then further cut them by another 50 points in September, driving the government’s borrowing costs down as the interest rate on treasury bills and bonds fell from 14.5 percent to 10.5 percent.