Egypt's foreign reserves exceeded $55 billion for the first time in the country's history last month, Prime Minister Mostafa Madbouly said on Wednesday, but households in the country continue to await the effects of its macroeconomic improvement.
Mr Madbouly said the Central Bank had reported that reserves rose by about $2 billion in a single month, which is “a good indicator” that “reflects the stability of the Egyptian economy”.
He also acknowledged that while inflation was falling, the effect of it was not being felt by consumers. “The citizen may say that these figures are very good, but what matters to him is to see prices stabilise and decline,” he said.
President Abdel Fattah El Sisi had directed a committee to draft price-stabilisation measures to ensure the availability of goods and curb gouging to be presented before the cabinet within 10 days.
Details remain thin and the government has repeatedly launched similar initiatives that have done little to alleviate the pressures on citizens.
The country has been facing increasing pressure from high oil prices, which have been surging due to the escalating US-Iran conflict.
Mr Madbouly on Wednesday also pushed back against widespread calls to reverse the fuel price increases imposed in March as crude swung from about $72 a barrel two weeks ago back to $85 a barrel.
The region's events, he said, had “confirmed the correctness” of moving cautiously.
Egypt's economy “remains remarkably sensitive to external pressures, and the biggest proof of this is how quickly the state of the economy changes between one week and the next”, economist Moustafa Badra told The National.
The country was “at the mercy of geopolitics”, he said.
The energy import bill has become “the biggest pressure point on the economy in recent months”, sharpened each summer as 110 million people switch on cooling through July and August, he added.
The record reserves are the product of a deliberate strategy, one Mr Badra described as letting the Egyptian pound absorb shocks rather than burning reserves to defend it. That approach is underwritten by Gulf deposits at the central bank, tying Egypt's monetary firewall to the region whose instability now threatens it.
Beneath the headline figure, the structural picture is less reassuring. The current account deficit more than doubled to $5.1 billion in the first three months of the year, from $2.3 billion a year earlier, central bank data earlier this week showed.
Total debt climbed to $164.8 billion by the end of March. Debt servicing already consumes about 83 per cent of tax revenue, according to the International Monetary Fund.
However, there is also a case for some optimism. Foreign direct investment rose by about a third to $13 billion in the first nine months of the fiscal year that ended on June 30.
Remittances, the largest single source of foreign currency for Egypt, climbed more than 30 per cent in the last fiscal year. The stock exchange's benchmark is up about 25 per cent and a staff-level agreement with the IMF in June could unlock about $1.6 billion, extending the programme to December.
Yet that optimism also collides with government policy decisions. To keep foreign money parked in its debt, the central bank has held its key rate at 19 per cent, even as inflation falls, because cutting would erode the high-yield “carry” that draws investors and finances the deficit.
Mr Badra warned that if oil stays elevated, “higher fuel and transport costs could feed into broader inflation, making it harder for central banks to justify cutting interest rates”.
“Many media outlets need to exercise more restraint before they publish lyrical reports on how our economy is improving and that the troubles are over,” Mr Badra said.
