Egypt’s Forex Reserves Increase by $5 Billion Till March This Year

Egypt has added $5 billion to its net foreign reserves, the highest level since Russia’s war on Ukraine two years ago that triggered the flight of funds from emerging markets (Ems) since then, thanks to the Ras El Hekma agreement signed between the UAE and Egypt.

The foreign exchange reserves increased to $40.36 billion at the end of March this year, compared with $35.31 billion in February, according the latest statistics released from Central Bank of Egypt showed.

It may be recalled that Egypt and the UAE have signed the $35 billion partnership agreement to develop an area in Ras El Hekma, which is spread over 40,600 acres and located 350 km northwest of Cairo.

This deal has helped alleviate part of Egypt’s foreign currency liabilities, and paved the way for a fresh agreement with the International Monetary Fund (IMF) which set a condition to Egypt that it should devalue its currency by nearly 40% against the US dollar.

Ras El Hekma Deal

As part of the deal, Egypt received the first tranche $15 billion from the UAE in late February, $10 billion fresh inflows and $5 billion, which was deposited by the UAE in the Central Bank of Egypt. This was subsequently followed by the central bank floating the EGP and hiking rates by 600 bps, which helped the Central Bank of Egypt in re-paying long pending dues to various international institutions.

Egypt is expecting more funds including $820 million tranche, which is part of the $8 billion package, later this week and another $1.1 billion, which is part of the $8 billion promised by the European Union.

Furthermore, Egypt is expected to receive the second tranche of $20 billion from the Ras El Hekma agreement in May this year. Even short-term local debt is luring both – local and foreign investors – and the later have pumped $17.8 billion into Egyptian Government’s debt in the first quarter of 2024.

It may be recalled that Egypt’s reserves plummeted in 2022 due to Russia’s invasion of Ukraine in February 2022 and subsequent flight of capital from the emerging markets placing the global economy in a precarious condition. Egypt’s foreign exchange reserves dwindled by $8 billion between February and August in 2022