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Egypt’s foreign currency reserves hit USD 16 billion - ASHARQ AL-AWSAT English Archive
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File photo of people and vehicles are seen caught in a traffic jam in front of the Central Bank of Egypt's headquarters in downtown Cairo. (Reuters/Amr Abdallah Dalsh)

File photo of people and vehicles are seen caught in a traffic jam in front of the Central Bank of Egypt’s headquarters in downtown Cairo. (Reuters/Amr Abdallah Dalsh)

Cairo, Asharq Al-Awsat—Egypt’s foreign currency reserves rose by USD 1.6 billion by the end of May, reaching USD 16.039 billion from USD 14.426 billion last April, the Central Bank of Egypt (CBE) has announced.

The USD 3 billion deposited in the CBE last month by Qatar bolstered the country’s foreign currency reserves after this have dropped from USD 36 billion prior to the revolution to a decade low of USD 13.4 billion.

However the jump in reserves will only cover three months of imports.

According to a report by the ministry of finance, Egypt’s foreign currency reserves are set to hit USD 19 billion by the end of 2013, and will reach USD 22.5 billion following the economic reform program set to be implemented in 2014.

The Shura Council, which temporarily holds sole legislative power in Egypt, approved amendments to the income tax. Sales tax is also expected to be amended to allow VAT to be imposed on six commodities. These amendments will help Egypt obtain a USD 4.8 billion loan from the International Monetary Fund (IMF).

Egyptian Planning Minister Amr Darrag yesterday announced that he expects the IMF deal to go through later this month, despite refusing some demands by the international money-lender.

According to Egyptian officials, this agreement will restore the trust of foreign investors and institutions in the Egyptian economy, as well as help Egypt receive more financial aid from other institutions and countries, bridging the finance gap estimated at USD 19.5 billion over the past three years.

After the revolution the Egyptian government received financial aid in the form of grants, loans, deposits or lines of credit from a number of regional countries and international institutions. Saudi Arabia provided USD 4 billion, Qatar USD 8 billion, Libya USD 2 billion and Turkey USD 1 billion. In addition to this, the Egyptian military lent USD 1 billion to the first post-revolution Egyptian government which at the time refused to apply for a loan from the IMF.

These aid packages bolstered the foreign currency reserves in the CBE; and some experts insisted that they be used effectively to derive maximum benefits.

Ahmed Adam, a banking expert, said that the decline in gold prices is an opportunity for the CBE, particularly as the gold price is predicted to soar by the end of 2013. He indicated that precautions should be observed, however.

Adam said: “According to reports [gold] prices will climb by the end of 2013, yielding better returns than making other investments.”  This is an “opportunity which must be grasped,” he added.

According to Adam, the decline in Egypt’s foreign currency reserves came about through mismanagement and making investments in traditional sectors such as buying US treasury bonds. Adam blamed the Egyptian government for not investing in gold despite predictions that prices are set to increase considerably in the future.