Egypt warns of shrinking forex reserves
According to the report by the Central Bank of Egypt, the countries forex reserves have contracted by 12.08%. During February and March of 2020 saw the reserves have shrunk to US$40 billion.
The Bank has stated, that the fall has been caused by the growing forex requirements to keep the strategic imports and international debt payments stable. The declining foreign investment also played a part.
Nevertheless, the reserves can still cover around 9 months of commodity imports. That is more than the global average of 3 months covered by the reserves.
Egyptian forex reserves are mostly denominated in RMB, Yen, US dollar, Australian dollar and Euro. The national financial system has undergone a shortage of US dollars due to a currency crisis. In 2016 the reserves have gone down to US$19 billion but have since recovered.
In order to solve the issue, the government has put certain reforms in place, which include VAT and energy subsidies cuts. Egypt has also entered an economic program with the support of the Extended Credit Facility and International Monetary Fund.