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Egypt’s net foreign assets deficit rises $1.5bn in March

Reuters/Amr Abdallah
The excess pound indicates a growing scarcity of foreign currency that is putting renewed pressure on Egypt to devalue its currency

Egypt’s deficit of net foreign assets (NFAs) rose by about $1.47 billion in March, bringing the total drawdown in the first quarter of the year to $4.47 billion, central bank data showed, a development that may prompt a consultation with the International Monetary Fund (IMF).

Almost all of the deficit represented NFAs with banks.

NFAs, which represent banking system assets owed by non-residents minus liabilities, have helped the central bank to support Egypt’s currency over the past two years.

However, under a $3 billion financial support package agreed with the IMF in December, Egypt agreed not to use the bank NFAs to stabilise or guarantee the level of the exchange rate and to consult with the IMF on possible action if banks’ NFAs decline by $2 billion over any three-month period.

The rise in the NFA deficit in March was the third in as many months. NFAs fell to a negative EGP755.57 billion ($24.39 billion) from minus EGP704.23 billion at the end of February.

That equates to a March decline of $1.47 billion using end-of-month central bank exchange rates, Reuters calculations show. The NFA deficit rose by $1.3 billion in February and $1.7 billion in January.

The central bank let the pound’s official price depreciate against the dollar by 0.87 percent in the first half of March to about 30.90 to the dollar, where it has since remained despite growing pressure to allow a devaluation. Street dealers this week were offering to buy dollars at EGP37.

The IMF said in December that Egypt had been financing its current account deficit by drawing down net foreign assets at banks.

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