Foreign Currency

Egypt’s net foreign assets deficit narrows, reflecting impact of reforms and fresh foreign currency



Cairo – May 15, 2024: The Central Bank of Egypt (CBE) reported a significant drop in the net foreign assets (NFAs) deficit during April, falling by 44.8 percent to hit LE 36.07 billion, compared to LE 65.3 billion in March.


The narrowing of the deficit reflects the surge in foreign currency reserves after the fresh inflows for FX from the Ras El Hekma deal, the depreciation of the Egyptian pound, and the International Monetary Fund’s release of funds from its Extended Fund Facility to Egypt.


Net international reserves (NIRs) surged to the highest level recorded in the past 4 years in April, hitting $41 billion from $40.4 at the end of March, according to a CBE release last week.


The CBE revealed in its latest data update that Egypt’s reserve money (MO) reached LE 1.614 trillion in April, compared to LE 1.683 trillion in March.


Local currency in circulation out of the central bank’s treasury jumped to LE 1.233 trillion last month, up from LE 1.20 trillion at the end of March.


Bank deposits in local currency recorded LE 381.2 billion at the end of April, compared to LE 482.8 billion at the end of March.


The net foreign asset deficit within the banking sector saw a substantial drop in March, falling to under $4.2 billion after reaching a record high of $22 billion in February.


The decline was attributed to the significant inflow of foreign currency triggered by the Ras El Hekma deal, recent reforms and the pound’s float.


On Tuesday, the CBE withdrew a record LE 1.1 trillion from banks’ liquidity in fixed-rate deposits at a rate of 27.75 percent during its weekly fixed-rate auction, marking the largest ingle withdrawal of surplus liquidity from the domestic banking system.


The CBE launched a new mechanism for its weekly fixed-rate auctions last month, moving towards a full allotment system that ensures all the bids submitted by commercial banks are accepted.


 



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