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Wednesday, 8 July 2020

FX reserves rise for the first time since February — stable outlook for the back half of the year?

FX reserves rise for the first time since February — stable outlook for the back half of the year? Foreign reserves rebounded slightly in June, rising to USD 38.2 bn from USD 36 bn in May after three consecutive months of decline, according to Central Bank of Egypt (CBE) data. Reserves have fallen almost USD 10 bn from a peak of USD 45.5 bn since the outset of the covid-19 pandemic in March as foreign capital fled the country, the vital tourism industry shut up shop, and the central bank stepped up purchases of strategic commodities and met debt repayments.

The disbursal of the first tranche of the IMF standby loan may be responsible for the uptick, Reuters quoted Naeem Brokerage’s head of research Allen Sandeep as saying. The IMF approved the immediate disbursal of the first USD 2 bn tranche of the USD 5.2 bn facility at the end of last month. The CBE did not provide an explanation on the increase.

Expect reserves to stay roughly flat until year’s end: “We expect foreign reserves to be largely flat until the end of the year, as the interbank market is well funded to deal with the non-essential trade balances,” Sandeep said.

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