The external environment is exerting increasing pressure on the country's external position. Egypt's official net international reserves (NIR) remained stable at USD40.99bn in February 2022, having increased by only USD14mn. Despite the marginal increase, the breakdown revealed pressures on NIR's foreign currency liquidity stock, which fell by USD2.56bn, the most since August 2021. Foreign currency reserves have fallen to USD31.59bn, the lowest level since July 2017. The significant decline in foreign currency was largely offset by the appreciation of gold, which increased by USD2.7bn in February to a record high of USD6.9bn. However, we believe that the significant increase in gold indicates that the CBE has accelerated the shift away from the USD (which currently accounts for the majority of the CBE's foreign currency reserves) toward gold in order to build more resilient buffers for the upcoming Fed monetary tightening. Meanwhile, the SDR stock fell by USD134mn to USD2.5bn. We believe that the marginal increase in reserves continues to reflect pressures on foreign currency inflows caused by growing fears of global tightening conditions and a rising commodity price outlook fueled by the escalating geopolitical conflict between Russia and Ukraine in the Black Sea. The overall level of foreign reserves increased by USD14mn in February, as the stock of non-official reserves stabilized at USD9.18bn by the end of the month.
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Mona Bedeir
Chief Economist
T +202 3300 5722