Net foreign assets in Egypt’s banking sector rose 8.7% in May to USD 14.7 bn, up USD 1.2 bn from April, according to data from the Central Bank of Egypt (CBE). This marks an improvement from April, when the country's net foreign assets in the banking sector saw their first decline in four months.

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Driving the rebound: The rebound was mainly driven by commercial banks’ net foreign assets hitting their highest level since February 2021, reaching USD 4.8 bn in May, a significant USD 3.2 bn increase from the USD 1.6 bn recorded a month prior. In May, foreign assets edged up to around USD 35.5 bn from USD 31.3 bn in April, while liabilities rose to USD 30.6 bn, up from USD 29.7 bn in the previous month.

This could be a sign of renewed confidence in the economy: The rise in net foreign assets in Egypt “partially reflects a return of confidence and growing inflows through official channels,” Alraya Consulting CEO Hany Abou El Fotouh told EnterpriseAM.

The central bank recorded a surplus of around USD 9.9 bn in May, down from USD 11.9 bn in April. Net foreign assets increased to USD 47.2 bn in May, up from USD 46.7 bn a month, while liabilities reached about USD 37.3 bn, compared to USD 34.8 bn in April. However, “the noticeable USD 2 bn decline in the central bank’s surplus raises legitimate questions: Was part of the reserves used to support the [local] currency, or perhaps to settle short-term liabilities?” Abou El Fotouh added.

Reason to be optimistic? “The continued growth of net foreign assets in the banking system, despite the delay in the fifth review of our loan agreement with the IMF, reflects increase confidence among credit rating agencies in Egypt’s ability to successfully carry out its ambitious economic reforms and paves the way for these institutions to upgrade Egypt's credit rating soon,” banking expert Mohamed Abdel Aal told us.

REMEMBER- Net foreign assets hit a record high inMarch, which surpassed the previous peak of USD 14.3 bn recorded in May 2024 — courtesy of the second and final tranche of the USD 35 bn Ras El Hekma agreement, which brought in some USD 14 bn in fresh inflows. Before that, Egypt had been in a prolonged net foreign asset deficit since February 2022, when the outbreak of the war in Ukraine triggered capital outflows of around USD 20 bn.

ALSO FROM THE CBE- Foreign reserves ticked up to USD 48.7 bn at the end of June, marking an increase of USD 174 mn from May, according to data released by the CBE. Net foreign reserves increased by around USD 2.3 bn since June 2024, according to our calculations based on CBE data.

Mixed bag for FX + gold + SDRs: FX reserves rose to USD 35.1 bn in June, up from USD 34.8 bn in May, while gold reserves slightly decreased to USD 13.6 bn, down from USD 13.7 bn in May. Meanwhile, special drawing rights were unchanged m-o-m at USD 41 mn, after having risen to USD 194 mn in April.

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