Egypt’s net foreign asset deficit narrowed significantly in March as the banking system started to feel the impact of the wave of reforms introduced by the central bank — the float of the EGP and the jumbo rate hike — and the renewed investor appetite for local debt. Net foreign asset deficit fell to just under USD 4.2 bn in the Egyptian banking system marking its lowest deficit in two years, after having recorded nearly USD 22 bn in February, according to Enterprise calculations based on Central Bank of Egypt figures.

Remember: Foreign investors have poured USD 17.8 bn into Egyptian government debt in the first quarter of 2024, Egyptian Central Securities Depository CEO Yasser Zaazaa said last month. When taking into account the USD 5.6 bn of debt that foreign investors sold during the period, net purchases of Egyptian debt came in at USD 12.2 bn for the period.

Commercial banks were the main drivers: The net foreign assets deficit in commercial banks narrowed to USD 2.8 bn in March compared to USD 13.2 bn the month before. Foreign assets in commercial banks rose 44% m-o-m, while liabilities fell 10% m-o-m.

The central bank’s net foreign asset position also saw improvement: The CBE’s net foreign asset deficit narrowed to USD 1.4 bn in March from USD 8.7 bn the month prior.

Working out our net foreign asset position is a bit different this time round: This is the first net foreign liabilities figure calculated using a post-float exchange rate — foreign liabilities in the country’s banking system fell nearly 10% m-o-m in USD terms and rose over 40% m-o-m in EGP terms, while foreign assets were up 21% in USD terms and rose 88% when calculated in EGP.

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