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Egypt's Net Foreign Reserves Rise

Egypt’s net foreign reserves increased $95 million by the end of March
Egypt’s net foreign reserves increased $95 million by the end of March
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Egypt's Net Foreign Reserves Rise

Egypt’s net foreign reserves increased $95 million by the end of March
Egypt’s net foreign reserves increased $95 million by the end of March

Egypt’s net foreign reserves increased $95 million by the end of March 2023 to $34.447 billion, compared to $34.352 billion by the end of February 2023, the Central Bank of Egypt (CBE) said Wednesday.

Meanwhile, sales of three-year treasury bonds issued on Tuesday plummeted to 1.09 million Egyptian pounds ($35,332) after the government baulked at the high yields demanded by investors concerned the currency is likely to depreciate soon.

The central bank received 26 bids worth 5.77 billion pounds with a weighted average yield of 24.15% at an auction on Monday, but accepted only one of these bids at a yield of 21.7%.

The accepted yield was unchanged from a similar offering on March 21, when 5.06 billion pounds were sold, despite a 200 basis-point increase in the central bank's overnight deposit rate to 18.75% on Thursday.

Analysts say investors are also holding back bond purchases on the expectation treasury bond yields will soon begin rising to match the increase in overnight rates.

The central bank said it raised rates to help tame soaring inflation, which leaped to 31.9% in February.

According to Reuters, analysts say pressure has been building on Egypt to devalue its currency after it lost ground on the black market in recent weeks, even though its official price has fallen by half against the dollar over the last year.

The official price of the pound has changed little over the last four weeks at about 30.9 to the dollar, while on the black market it has been trading at between 36 and 37, bankers and dealers say.

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IMF: Middle East Conflict Escalation Could Have Significant Economic Consequences

Displaced families, mainly from Syria, gather at Beirut's central Martyrs' Square, where they spent the night fleeing the overnight Israeli strikes in Beirut, Lebanon September 28, 2024. REUTERS/Louisa Gouliamaki
Displaced families, mainly from Syria, gather at Beirut's central Martyrs' Square, where they spent the night fleeing the overnight Israeli strikes in Beirut, Lebanon September 28, 2024. REUTERS/Louisa Gouliamaki
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IMF: Middle East Conflict Escalation Could Have Significant Economic Consequences

Displaced families, mainly from Syria, gather at Beirut's central Martyrs' Square, where they spent the night fleeing the overnight Israeli strikes in Beirut, Lebanon September 28, 2024. REUTERS/Louisa Gouliamaki
Displaced families, mainly from Syria, gather at Beirut's central Martyrs' Square, where they spent the night fleeing the overnight Israeli strikes in Beirut, Lebanon September 28, 2024. REUTERS/Louisa Gouliamaki

The International Monetary Fund said on Thursday that an escalation of the conflict in the Middle East could have significant economic ramifications for the region and the global economy, but commodity prices remain below the highs of the past year.

IMF spokesperson Julie Kozack told a regular news briefing that the Fund is closely monitoring the situation in southern Lebanon with "grave concern" and offered condolences for the loss of life.

"The potential for further escalation of the conflict heightens risks and uncertainty and could have significant economic ramifications for the region and beyond," Kozack said.

According to Reuters, she said it was too early to predict specific impacts on the global economy, but noted that economies in the region have already suffered greatly, especially in Gaza, where the civilian population "faces dire socioeconomic conditions, a humanitarian crisis and insufficient aid deliveries.

The IMF estimates that Gaza's GDP declined 86% in the first half of 2024, Kozack said, while the West Bank's first-half GDP likely declined 25%, with prospects of a further deterioration.

Israel's GDP contracted by about 20% in the fourth quarter of 2023 after the conflict began, and the country has seen only a partial recovery in the first half of 2024, she added.
The IMF will update its economic projections for all countries and the global economy later in October when the global lender and World Bank hold their fall meetings in Washington.
"In Lebanon, the recent intensification of the conflict is exacerbating the country's already fragile macroeconomic and social situation," Kozack said, referring to Israel's airstrikes on Hezbollah in Lebanon.
"The conflict has inflicted a heavy human toll on the country, and it has damaged physical infrastructure."
The main channels for the conflict to impact the global economy have been through higher commodity prices, including oil and grains, as well as increased shipping costs, as vessels avoid potential missile attacks by Yemen's Houthis on vessels in the Red Sea, Kozack said. But commodity prices are currently lower than their peaks in the past year.
"I just emphasize once again that we're closely monitoring the situation, and this is a situation of great concern and very high uncertainty," she added.
Lebanon in 2022 reached a staff-level agreement with the IMF on a potential loan program, but there has been insufficient progress on required reforms, Kozack said.
"We are prepared to engage with Lebanon on a possible financing program when the situation is appropriate to do so, but it would necessitate that the actions can be taken and decisive policy measures can be taken," Kozack added. "We are currently supporting Lebanon through capacity development assistance and other areas where possible."