Net foreign assets narrow for first time in three months

Good afternoon, friends, and congratulations on making it to the end of the week. We’re in for a hot weekend, but we’re looking forward to cooling down nonetheless.

THE BIG STORY TODAY-

Net foreign assets (NFAs) in Egypt’s banking sector shrank for the first time in three months by nearly USD 583 mn to hit USD 17.9 bn in August, marking a 3.3% m-o-m decrease, according to data from the Central Bank of Egypt. On an annual basis, our banking sector almost doubled its net foreign assets, compared to USD 9.7 bn in August 2024, according to CBE’s historical data.

Why do NFAs matter? Think of NFAs as the banking system’s core financial buffer — the net difference between the foreign currency banks hold (assets like USD and EUR) and what they owe to entities abroad (liabilities). A positive and growing NFA signals health: a strong capacity to cover import bills. In that case, the EGP will generally hold steady or even appreciate. But when NFAs shrink or turn negative, it means we owe more FX than we hold — and that’s when the EGP tends to slide against key foreign currencies.

Behind the dip: “The NFA narrowing was due to a decline in banks’ foreign assets by c. 2% m-o-m, which we attribute to the regular m-o-m liabilities. It is worth mentioning that Egypt imported LNG shipments in August, as August represents its peak month of electricity consumption, and paid USD 306 mn of its dues to the International Monetary Fund (IMF) in the first week of August,” HC’s Heba Monir told EnterpriseAM.

THE BIG STORY ABROAD

Global headlines are following the Gaza-bound humanitarian aid flotilla currently unlawfully detained by Israeli forces. In what activists and international observers are calling a flagrant violation of international law, Israeli naval forces intercepted and boarded dozens of civilian vessels carrying humanitarian aid to Gaza. Over 150 activists from more than 20 countries have been detained in international waters, including Swedish climate activist Greta Thunberg and Nkosi Zwelivelile Mandela, grandson of South African anti-apartheid activist Nelson Mandela.

The Global Sumud Flotilla set sail to deliver desperately needed food, meds, and water filtration equipment to Gaza’s starved population. Flotilla organizers condemned Israel’s deployment of water cannons, scrambling of communications systems, and boarding of the flotilla vessels as an act of piracy.

The seizure of the vessels sparked immediate global backlash and protests across multiple continents. Turkey denounced Israel’s actions as “an act of terror,” Colombia ordered the expulsion of Israel’s entire diplomatic delegation and terminated the country’s freetrade agreement with the occupying state, and Malaysia stated that “Israel has shown utter contempt not only for the rights of the Palestinian people but also for the conscience of the world.” Protests erupted in cities in Italy — where major labor unions called for a nationwide general strike — as well as in Belgium, France, Germany, Greece, Spain, Turkey, and Argentina.

As detained activists face deportation, Israel’s defense minister issued what he called a last chance for Palestinians to flee Gaza City, stating that “those who remain [will be considered] terrorists and terror supporters.” The Israeli military has closed Al Rashid Street, Gaza’s main coastal highway, further tightening the noose around the city. The Red Cross and Doctors Without Borders have both suspended operations in Gaza City as the humanitarian catastrophe deepens.

Despite Israel’s efforts, flotilla organizers report that approximately 23 vessels continued sailing toward Gaza as of publication, determined to complete their mission. (NYT | Reuters | CNN)

☀️ TOMORROW’S WEATHER- We’re in for another hot day tomorrow, with the weekend being inaugurated with 35°C temperatures before cooling to 23°C at night, according to our favorite weather app.