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Egypt’s net foreign assets climb by $2bn in December 2022

Person, Man, Adult REUTERS/Mohamed Abd El Ghany
Russia's invasion of Ukraine sparked a currency crisis that led to Egypt to begin negotiating with IMF

Egypt’s net foreign assets (NFAs) improved by EGP47.28 billion in December 2022, marking a second month of increases after it allowed its currency to depreciate sharply in October, central bank data showed.

NFAs improved to a negative EGP494.3 billion from a negative EGP541.5 billion in November.

This works out to an improvement of about $2.06 billion using end-of-month central bank exchange rates, according to Reuters calculations.

Before the October depreciation, the central bank had been relying on NFAs, which represent banking system assets owed by non-residents minus liabilities, to help support the currency. NFAs include foreign assets held by the central bank.

Russia’s invasion of Ukraine in February sparked a currency crisis that led to Egypt to begin negotiating with the International Monetary Fund (IMF) for a financial assistance package.

The central bank allowed the pound to depreciate by 14.5 percent on October 27 as part of a $3 billion rescue package it concluded with the IMF. Since then it has continued to let the currency weaken.

The pound has fallen by nearly 50 percent since the invasion to about 30 to the dollar after the crisis caused tourism to fall, commodity import prices to rise and foreign investors to pull more than $20 billion out of Egyptian treasury markets.

NFAs stood at a positive EGP248 billion in September 2021, before the decline began.

Changes in the amount of NFAs represent net transactions of the banking system with the foreign sector, including those of the central bank, according to the bank.