Egypt's foreign reserves drop by $4 bln on Ukraine war shock

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Thursday - 7 April 2022

CAIRO, April 7 (Reuters) - Egypt's net foreign reserves fell by nearly $4 billion in March, the central bank said on Thursday, after the war in Ukraine caused foreign investors to flee Egyptian treasuries, putting pressure on the currency.

The March reserves figure should have included a $5 billion deposit that Saudi Arabia said it placed with Egypt's central bank just before the end of March, indicating that the scope of the strain on reserves had been even greater. read more

The pressure on the currency prompted the central bank to devalue the pound by 14% on March 21.

Reserves at the end of March fell to $37.082 billion from $40.994 billion at the end of February, the Central Bank of Egypt (CBE) said. Reserves had been just above $40 billion since November 2020.

Egypt's economy faltered as investors exited emerging markets following Russia's invasion of Ukraine. Egypt is a major importer of wheat from Russia and Ukraine, and both countries are important to Egypt's tourism sector.

"In the wake of the Russia/Ukraine crisis and in line with the CBE's mandate to maintain price stability, the CBE decided to temporarily mobilise its excess foreign currency reserves to calm the markets," a statement from the central bank said.

"Such mobilisation was aimed at covering substantial foreign investor outflows and partially covering local demand in order to ensure the availability of imported strategic goods and to repay external debt obligations in a timely manner."

Gulf Arab states have promised to channel up to $22 billion to Egypt in investments and deposits.