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Egypt's international reserves slow their fall Foreign reserves dropped $800 million in May against $2 billion the month before; this slowdown in currency decline can be a good or bad sign depending on what triggers it, say experts
Egypt's international reserves have fallen by their lowest monthly amount since the start of the revolution. According to Egypt's Central Bank, the country's foreign reserves reached $27.2 billion at the end of May, down from $28 billion in April. This compares favourably with the fall of around $2 billion seen between March and April. Foreign reserves have plunged $8.8 billion since January as a consequence of the fall in revenue from vital sources of overseas currency, such as tourism and foreign investment. Some economists were more optimistic than others about the news, but nobody was able to predict when the decline would be reversed. "It's definitely a good sign that the reserves are decreasing less. We were expecting a two billion decrease but the announced figures were better than our expectations," said a famous banker who requested anonymity. Magda Qandil, executive director of the Egyptian Centre for Economic Studies, didn't see grounds for celebration. "It is less problematic but it is still negative," she said, adding that other information is needed to properly judge the figure. It's not known whether the slowdown in foreign currency decline is due to a fall in demand or an increase in resources -- to judge this would need a thorough study of figures for tourism, exports and imports, foreign investments and remittances. Revenue from the Suez Canal, which has registered a slight improvement, can also have an impact. "We should know what triggered the improvement, I hope it will be an increase of exports and foreign direct investment. If so, it could be a good sign but we need the figures first to know," said Qandil. For the moment, Egypt remains within safe reserve limits, able to cover six months of imports. The international average is for between six and nine months. "We are now on the edge. If we reach the level for three months of imports then it will be a serious problem, but I am not expecting that things to become that bad," says the banker.
