Following recent international bond sale, Egypt’s foreign reserves surged to a record in February which providing a financial buffer as the country’s policy makers begin to cut interest rates.
Reserves jumped by $4.3 billion to $42.5 billion, reported Bloomberg News, citing a statement by the central bank. Bank officials said last month’s $4 billion Eurobond sale was only one contributor to the increase, and a marked improvement across a range of economic indicators had also provided a boost, Sub-Governor Rami Aboul Naga told Bloomberg News.
The increase is expected to help offset the impact of $12 billion in planned debt repayment this year as well as potential capital outflows as a result of lower interest rates on local debt, according to Hany Farahat, senior economist at CI Capital in Cairo. The government is also preparing to raise as much as euro 1.5 billion in the coming weeks, taking advantage of lower borrowing costs in Europe.
Since the central bank floated the pound in November 2016 and secured a $12 billion loan deal with the International Monetary Fund, Egypt’s foreign reserves have soared. Having cut benchmark interest rates last month for the first time since floating the pound has started a widely anticipated easing cycle after prohibitive borrowing costs dampened inflation and attract $20 billion into local-currency debt.
Prospect that overseas investors will lose their appetite for Egyptian local-currency debt were raised after falling interest rates in Egypt were coupled with expectations that the US Federal Reserve will move in the opposition direction.