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Remittance revival pushes Egypt’s FX reserves to record

Egypt foreign exchange forex fx Alamy
The devaluation of the Egyptian pound in March mean the return of remittances to formal banking channels, boosting Egypt's foreign exchange reserves
  • 26% remittance rise since April
  • Formal channels lifted by devluation
  • Loans likely to mean further boost

Egypt recorded its highest foreign exchange reserves ever in June, after remittances rose almost 75 percent year on year.

Boosted by the disbursement of loans and investment deals, as well as the return of remittance payments to the formal banking sector, reserves reached $46.38 billion, up from $46.13 billion in May, which itself was also a record. 

On Monday, the Central Bank of Egypt announced that remittances increased in May by 73.8 percent year-on-year to $2.7 billion.

The new figures were also up 26.6 percent compared to April, which recorded around $2.2 billion.

The bank attributed the return of remittances to formal banking channels to the devaluation of the Egyptian pound in March.

Economic analysts say the country’s forex reserves could climb yet higher, with lending deals between Egypt and a number of multinational organisations heading for conclusions.

The government reached a staff level agreement with the International Monetary Fund last month to disburse a $1.2 billion tranche of the $8 billion extended fund facility agreed in March. That third tranche could be released imminently, subject to IMF board approval.

A further $1 billion of concessional loans from the European Union and a $700 million tranche of a $3 billion loan from the World Bank are both expected to be deposited in Egypt’s central bank vaults before the end of the year.

In May, Fitch Ratings had forecast that Egypt’s foreign exchange reserves would rise to $49.7 billion during the financial year 2023/2024, and to $53.5 billion by 2024/2025.

This is despite Fitch’s predictions of a widening current account deficit, reaching 5.2 percent of GDP by July 1 2024.

The big jump in reserves came in March, when ADQ’s $35 billion investment to develop the area of Ras El Hekma on the north coast pushed Egypt’s foreign exchange balance from $35.3 billion to $40.4 billion.

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