Egypt’s Foreign Assets Deficit Shrinks to $4.18 Billion in March
In a positive turn of events, Egypt’s net foreign assets deficit decreased by $17.8 billion in March, marking its second consecutive month of decline. This improvement was fueled by a combination of factors, including remittances, foreign portfolio investment, and a generous $5 billion payment from the UAE.
Boost from UAE
Egypt received a second $5 billion payment from the UAE in early March, specifically for a land development project on the Mediterranean coast. This additional injection of funds came after an initial payment made in February, further contributing to the country’s economic stability.
IMF Agreement and Currency Devaluation
On March 6, Egypt made the bold move to devalue its currency and announced an $8 billion agreement with the International Monetary Fund (IMF). This decision sparked increased portfolio investments and remittances from Egyptian workers abroad, bolstering the country’s financial situation.
Significant Improvement
The March NFA deficit shrunk to 200 billion Egyptian pounds, equivalent to $4.18 billion, down from 679 billion pounds in February. Despite this progress, the figures do not yet reflect an $820 million first installment received in early April as part of the expanded IMF financial support program.
Commercial Banks Benefit
Commercial banks experienced a notable increase in foreign assets by $7.4 billion in March, while their liabilities decreased by $3 billion. This shift, combined with the March 6 devaluation, contributed to the overall positive trend in Egypt’s financial landscape.
Central Bank’s Role
The central bank also played a crucial role in the improvement, with foreign assets rising by $3.5 billion and foreign liabilities decreasing by $3.9 billion. This strategic management of assets and liabilities has helped stabilize Egypt’s economic position.
Long-Term Strategy
The reduction of the deficit by $17.8 billion follows a previous decline of $7.04 billion in February. Over the past two and a half years, the central bank had been drawing on net foreign assets to support the country’s currency. As of September 2021, NFAs stood at a positive $3.9 billion, reflecting Egypt’s ongoing efforts to strengthen its financial foundation.