Egypt's foreign reserves jump on Libyan funds, but still low
By Patrick Werr:
Egypt's foreign currency reserves jumped by $1 billion to $14.43 billion in April, helped by a large deposit from Libya that analysts said would not resolve a currency crisis.
Since a popular uprising that ousted Hosni Mubarak in early 2011, Cairo has run through more than $20 billion in reserves, borrowed billions more from abroad and delayed payments to oil companies to support its pound.
The uprising chased away tourists and investors, two of Egypt's main sources of foreign exchange, leaving it stuck in negotiations for a $4.8 billion dollar loan from the International Monetary Fund. So far it has balked at the economic policy conditions attached to the loan.
The country's reserves only rose by $1 billion last month despite the $2 billion deposit from Libya, said Mohamed Abu Basha of EFG Hermes.
Some $900 million was burnt in April, "partially reflecting the $600 million foreign exchange auction," he said.
The central bank held an exceptional $600 million foreign currency auction on April 14 to cover strategic imports such as wheat, meat and cooking oil.
Libya announced the $2 billion deposit at the Egyptian central bank last month in a show of support for its neighbour.
Qatar last month promised to buy $3 billion in Egyptian treasury bonds but is asking for an interest rate of 5 percent, a price Egypt considers too high, an Egyptian official said last week.
They remain below the $15 billion level economists say is needed to cover three months worth of imports.
"The IMF remains critical for the stability of the balance of payments in the medium term," Abu Basha said.
IMF TALKS
Newly appointed Planning Minister Amr Darrag said on Wednesday Egypt and the IMF had no big difference in their negotiations on what needed to be achieved, but rather on how to achieve it.
Darrag, appointed to the post in a cabinet reshuffle announced on Tuesday, is expected to take a leading role in negotiations for the IMF loan. He is a member of the Freedom and Justice Party of President Mohamed Mursi.
"The end result, there are targets we all agree on," he said. "The budget deficit has to shrink. It cannot exceed 9.5 percent of GDP. Reserves have to reach a level around $20 billion."
Egypt requested the $4.8 IMF loan in August.
Foreign reserves may receive a boost of $1.5 to $2.0 billion in May or June if a planned tender of Orascom Construction Industries' Egyptian shares by its Dutch-based parent goes through, Pharos wrote in a research note on Wednesday.
In addition, a Turkish source said last month it would transfer the remaining $1 billion of a $2 billion budget support package agreed for Egypt last year within two months.
Alia Mamdouh, an economist with CI Capital, predicted that Egypt's funding gap will be $22 billion in the fiscal year beginning on July 1.
Reuters
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