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Net foreign assets in Egypt’s banking sector rose to USD 8.7 bn in January, marking a monthly hike of 65.8% from USD 5.2 bn in December, according to data from the Central Bank of Egypt. This follows two consecutive months of decline in the country’s net foreign assets, which last dropped by 12.2% in December due to local seasonal factors and an increase in demand for FX resources.
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Reduced deficit in commercial banks helped improve the banking sector’s overall position: The net foreign asset deficit in commercial banks came in at USD 3.3 bn during the month, down from USD 6.4 bn, driven by a simultaneous rise in net foreign assets (reaching USD 25.2 bn) and a decline in foreign liabilities (hitting USD 28.5 bn).
There was also improvement — albeit modest — over at the central bank: The CBE recorded a net foreign asset surplus of USD 12.0 bn in January, up from USD 11.7 bn in December. Foreign assets were unchanged at USD 45.7 bn, while foreign liabilities fell to just under USD 33.8 bn from USD 34.1 bn in December.
Driving the rebound: “We attribute this improvement to Egypt issuing USD 2 bn in eurobonds in January and receiving the first tranche worth EUR 1 bn of the European Union’s EUR 7.4 bn financing package,” HC Securities’ Heba Mounir told EnterpriseAM.
Despite the recent uptick, the country’s net foreign asset surplus has shrunk 39.3% since its May 2024 peak of USD 14.3 bn, with commercial banks now clocking in their sixth consecutive month recording a net foreign asset deficit.
REMEMBER- The May peak marked the first time that net foreign assets recorded a surplus in over two years, which followed the second and final tranche of the USD 35 bn Ras El Hekma agreement bringing in some USD 14 bn of fresh inflows. Before this, the country’s net foreign asset position had been in a deficit since February 2022, when the Russian invasion of Ukraine triggered a shock capital outflow of almost USD 20 bn.
