Ousted former president Hosni Mubarak told a leading sporting figure last week that on the eve of the 25 January Revolution, in which he was ousted, Egypt had $51 billion of foreign reserves, some $15 billion higher than the official figure of $36 billion. The comments have raised many eyebrows since the media has said repeatedly since January 2011 that Egypt's reserves have been shrinking over the last two-and-a-half years as a result of shrinking tourism revenues and foreign investment, reaching a third of the original figure last year. The country's reserves have only recovered as a result of aid from the Gulf countries, bringing them back to a safe level to cover Egypt's imports. Mubarak's comments imply that there may have been manipulation or corruption in dealing with the reserves. According to Faika Al-Refaai, former deputy governor of the Central Bank of Egypt (CBE), the bank has a policy of putting some of its foreign currency holdings on deposit in Egyptian banks, which invest such sums abroad. “These amounts are not considered as foreign reserves, as they are deposited in local banks and invested abroad. If they were included in the official reserves they would be calculated twice, once as foreign assets and once as international reserves,” Al-Refaai said, suggesting that this mechanism could have given rise to the confusion. Al-Refaai said that different government authorities could also have deposits of foreign cash at the Central Bank. “What the local banks have as deposits from the Central Bank and what the Central Bank has as accounts from different government authorities in foreign currencies aren't included in the official foreign reserves figures,” she said. On the other hand, banking expert Ahmed Adam said that the controversy could indicate some inaccuracy in the figures. Adam told Al-Ahram Weekly that the alleged $51 billion was “closer to the truth”, as it combined the official foreign reserves as previously announced of $36 billion with those that are not listed and are harder to track. Foreign currency deposits that are not listed in the foreign reserves are usually used to cover immediate needs, such as supplying the market with the dollars needed to pay for imports. “The non-listed reserves reached $10 billion in December 2010, but dropped to $7.1 billion in January 2011, so the official foreign reserves and non-official figures, when added together, reached about $43.1 billion,” he said. Adam added that after the revolution, in February 2011, there was no information available about the non-official foreign reserves of $7.1 billion. Two months later, it was announced that the CBE's foreign reserves had lost $10 billion in value, and Farouk Al-Okda, the CBE governor at the time, said that about $4.5 billion had left the country. “So in addition to the $7.1 billion, there is also the missing $5.5 billion that no one knows the fate of,” Adam said. After the 25 January Revolution, the Al-Wafd newspaper claimed that there was an account at the CBE that only the president had the right to make withdrawals from, Adam explaining that this held money donated by the Arab countries to Egypt, for example after the 1992 Cairo earthquake. He estimated the amount of money held in this account to be $9 billion. “If we add that to the previously mentioned $36 in official reserves and the unlisted $7.1 in unofficial reserves, it exceeds the figure Mubarak revealed recently,” Adam said. He added that it was important that the mystery of the reserves be cleared up, saying that the lack of political will and the weakness of the presidency that had characterised the rule of the Muslim Brotherhood in Egypt until the 30 June Revolution had done nothing to clear up the issue. There was a need to take decisive action to uncover the circumstances surrounding the foreign cash reserves before the 25 January Revolution, he said, and to find out how money had been allowed to disappear abroad. “An investigation should be conducted into the suspicious decline in the reserves from $36 billion to $15 billion in just two years,” he said. However, it is no secret that this vast amount of money was lost in attempts to maintain the value of the Egyptian pound against the US dollar. These attempts ultimately failed, the pound collapsing in value after the CBE halted its market interventions, indicating that the policy had been ill thought out. “Legal action should be taken against those who were in charge at the Central Bank at the time,” Adam said. The pound has lost around 15 per cent of its value since the revolution, and its fall was only halted following the 30 June Revolution and the arrival of loans and grants in aid from the Gulf countries. The foreign reserves have witnessed marginal declines during the past two months, however. Last week, the Central Bank announced that Egypt's net international reserves (NIR) had dropped $119 million in October 2013 to a new figure of $18.6 billion. This minor plunge was attributed to the obligation of the CBE to pay for the country's imports. The drop in foreign reserves was the second consecutive fall, as they had slipped by $200 million in September after the CBE had held a large foreign exchange auction, selling $1.3 billion of its foreign reserves to banks working in Egypt as a means of making dollars available to the market. If no other funds arrive in the form of aid from the Gulf countries and no foreign direct investments are made, then a further drop in the foreign reserves can be expected. Egypt has a long-term deficit, and it has little foreign direct investment. The foreign reserves at the CBE in June 2013, before the ousting of former president Mohamed Morsi, reached $14.9 billion. Following the 30 June Revolution, financial aid from the Gulf states of $7 billion helped to inflate the reserves. CBE Governor Hisham Ramez declared in October that a $2 billion deposit would be returned to Qatar before the end of the year after it had refused to renew it upon its maturity. Interim Prime Minister Hazem Al-Beblawi also said that Kuwait would allow Egypt a five-year period rather than the initial one-year one to return a $2 billion deposit it had given the Egyptian government. At the beginning of November, the CBE returned a $500 million deposit to Qatar. Another $500 million should be repaid to Qatar before the end of this year. During Al-Beblawi's recent visit to the UAE, the country also granted Egypt an additional $2.9 billion, supposed to “cover the drop that will happen after returning the Qatari deposit,” Adam stated. But “Egypt can't continue to live on rich Arab countries' donations,” he added. “If this financial assistance ceased to exist, Egypt's foreign reserve would be very much eroded.” The writer is a freelance journalist. .
