Live – Heba Al-Kurdi: The continued recovery of capital flows and the increase in foreigners’ appetite for Egyptian debt instruments reinforced the rise in Egypt’s foreign reserves last December, recording the highest monthly increase during 2020.
Despite the increase in Egypt’s international reserves, there are still three risks facing dollar liquidity and Egypt’s external financial situation, most notably high liabilities.
Data from the Central Bank of Egypt showed an increase in international reserves By the end of December 2020reaching $40.063 billion, an increase of $841 million, on a monthly basis.
Reserve momentum
For her part, Mona Badir, a macroeconomic analyst at Prime Investment Bank, told Mubasher that Egypt’s external reserves are gaining support from capital flows and a decline in demand for imports.
Badir pointed out that foreign currency flows in Egypt are still regaining their lost momentum, against the backdrop of foreigners’ increased appetite for the local debt market.
Badir pointed out that capital flows into local debt jumped to $24 billion in November, expected to exceed $25 billion by the end of last December.
The economic analyst noted that Egypt received the legal payment from the credit standby agreement amounting to $5.2 billion with the International Monetary Fund, as it received $1.6 billion last month.
Last May, Egypt received $2.77 billion from the International Monetary Fund, which represents the value of the rapid credit financing granted to the Egyptian government.
In June, the Executive Board of the International Monetary Fund finally approved the disbursement of a loan to Egypt worth $5.2 billion (equivalent to 3.76 billion Special Drawing Units) for a period of one year, within the framework of the “Credit Standby Agreement” instrument, to meet the balance of payments financing needs resulting from the “Covid-19” epidemic. “.
She continued: The trade deficit is still on a contraction path, according to the latest data available from the Central Bureau of Statistics.
3 pressures
Despite this, Badir believes that Egypt’s external position and liquidity may remain under pressure from three basic factors.
She said that the first factor is the expected weakness in expatriate remittances, which are still expected to be more important in 2021.
The economic analyst pointed to the long journey of the tourism sector to recovery in light of the renewed closures of economic activities around the world, in addition to travel bans and precautionary measures.
Regarding the third factor, Badir referred to the schedule of debt installments during 2021 and beyond.
Bdeir noted that despite the increase in foreign assets, net foreign assets are still much lower than pre-Covid-19 levels, due to high liabilities.
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