Egypt's net foreign reserves slipped to US$25.71 billion in July but economists said there was a slowdown in the rate of the decline, which may now suggest the worst of the capital flight since Egypt's recent uprising was over. Foreign reserves stood at $26.57 billion at the end of June, indicating a fall of $859 million in July. "The rate of decline is seen to have stabilized and the worst of the capital outflows is probably behind us," said Liz Martins, a senior economist in HSBC. In June, the reserves appeared to have fallen by just $659 million. But EFG-Hermes strategist Simon Kitchen said this figure was skewed because Egypt revalues its gold holdings each June, the end of the financial year, and this year an upwards recalculation disguised the scale of foreign currency outflows. "Actually the fall in foreign currency assets was better month on month. It was down $859 million in July, and down $1.2 billion in June. The monthly fall in reserves looked better in June because the value of gold reserves was revalued upwards," he said. He added that the upward revision in the value of Egypt's gold was worth $563 million in June 2011. In another positive sign, Kitchen pointed to a slight increase in Egypt's so-called "unofficial reserves", which climbed by $209 million in July to $724 million. They had fallen to as low as $175 million in May. Kitchen said this usually reflects foreign buying of Egyptian treasury bills but added: "I suspect that foreigners will not be coming into T-bills in high volumes for some time." "Unofficial reserves," referred to as other foreign currency assets by the central bank, are additional assets held with commercial banks but not included in official reserve figures. The central bank has said its drawdown of reserves was a temporary measure to cover a balance of payments gap until the economy gets back on its feet following the uprising that drove Hosni Mubarak from office 11February. "Egypt's good exports and Suez Canal revenues have held up fairly well so far, in part because of a relatively healthy global trade environment," said HSBC's Martins. "But the softening we are seeing in the global economy could pose a risk going forward," she said. Revenue from the Suez Canal, a waterway that is a vital source of foreign currency in Egypt, rose 16 percent year on year to $455.2 million in June. But jitters from global markets have been felt in Egypt. The main index fell more than 4 percent on Sunday in early trading, which tracked falls abroad sparked by fears about the performance of the US and European economies.
