Reserves down again
EGYPT's foreign currency reserves fell to $18 billion in December 2011, a 50 per cent drop compared to December 2010. The reserves lost $2 billion compared to the month before. Egypt's reserves had been on a downward slide since the beginning of 2011. Members of the ruling Supreme Council of the Armed Forces had warned that reserves would fall to $15 by end of January which would only provide coverage for three months of imports.
According to a Central Bank of Egypt press release, Egypt's transactions with the external world in January/September of fiscal year (FY) gave rise to an overall Balance of Payment (BoP) deficit of $12.7 billion compared to the same period the year before when it had registered an overall surplus of $719.1 million. However, the BoP deficit registered in January/September 2011 was mitigated by the step-up of the remittances of Egyptians working abroad from $ 9.3 billion in January/ September 2010 to $10.4 billion, as well as the increase in Suez Canal receipts from $3.5 billion to $3.9 billion.
The CBE attributed the deficit to the plunge of tourism revenues to $6.3 billion, a $3 billion decrease from the year before. Another reason for the BoP is the reversal of portfolio investments in Egypt from net inflows of $12.2 billion recorded in January/September 2010, into net outflows of $8.9 billion in January/September 2011. That was ascribed to the sales of foreigners' holdings of securities, especially Egyptian treasury bills which registered net sales of $7.5 billion against net purchases of $8.6 billion in the comparable period the year before.
Moreover, the period saw a dramatic fall in FDI in Egypt to $375.5 million from $5.7 billion the year before.