Egypt's foreign reserves drop by $1bn in May

Investors have withdrawn money from emerging markets in recent months as concerns about the economic impact of the coronavirus grew

The Cairo skyline. Egypt received a $639 million credit facility from the Arab Monetary Fund. Reuters
Beta V.1.0 - Powered by automated translation

Egypt's foreign reserves declined by a further $1 billion (Dh3.67bn) in May, the central bank said on Sunday, as the coronavirus crisis continues to pressure the economy.

Reserves at the end of May were $36bn, down from $37bn at the end of April, having already fallen by $3.07bn in April and $5.4bn in March as investors unnerved by the coronavirus pulled cash from emerging markets.

The May decline looks small compared with the previous months, but the extent of outflows could be higher if any proceeds from May's $5bn eurobond sale and $2.78bn received from the International Monetary Fund  were used to bolster reserves.

"For now, we can assume capital flight," said Renaissance Capital analyst Ahmed Hafez, adding that banks may have tapped central bank funds to cover some of their net foreign liabilities.

"Overall, higher than expected, but under control," he said of the latest decline.

The central bank could not be immediately reached for comment.

The Covid-19 crisis has squeezed some of the country's main sources of foreign currency, especially tourism and remittances from workers abroad.

"With close to $8bn of external funding raised during the month, the net international reserves drop comes as a surprise to us," said Allen Sandeep of Naeem Brokerage.