FX inflows push net foreign reserves to highest level in two years: Net foreign reserves rose by over USD 5 bn to their highest level since Russia’s war on Ukraine triggered the flight of hot money from EMs back in February 2022. Reserves increased to USD 40.36 bn at the end of March, compared to USD 35.31 in February, according to central bankfigures.

No surprise: In late February the first tranche of USD 15 bn from the Ras El Hekma agreement arrived in the nation’s coffers — USD 10 bn were fresh inflows and USD 5 bn were in the form of a previous UAE deposit at the CBE. This was shortly followed by the central bank floating the EGP and hiking rates by 600 bps which helped FX liquidity return to the official banking system.

Money in, money out: With inflows picking up, the central bank was quick to pay dues to clear port backlogs and reduce arrears to international oil firms.

The rise should continue: Egypt has a whole lot of funds coming in over the next few months. We’re getting the first USD 820 mn tranche of the IMF USD 8 bn package this week and another USD 820 mn in June and EUR 1 bn from the EU EUR 7.4 bn package before the summer. Egypt is also due to receive the second tranche of USD 20 bn from the Ras El Hekma agreement in May.

Also helping: Short-term local debt has been extremely attractive to both local and foreign investors since the float — foreign investors have poured USD 17.8 bn into government debt in the first quarter of 2024.

All in all, we lined up a total of USD 57 bn of finance over the past few weeks, which will trickle in over a period of years as we meet reform milestones or as investments reach financial close.

Remember: Egypt’s reserves took a hit in 2022 when the double-blow of Russia’s invasion of Ukraine and tightening global financial conditions triggered capital flight from emerging markets. While Egypt’s reserves lost almost USD 8 bn in the six months between February and August 2022, they have been able to recoup only a mere USD 2 bn as of February.

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