The Central Bank of Egypt (CBE) said that gross international reserves recorded $44.3bn in June 2018, the highest on record. Accordingly, the ratio of gross international reserves to total external debt in the second quarter (Q2) of 2018 remained among the highest levels in the last six years. On Tuesday, an additional $12.7m there was a new increase in foreign exchange (FX) reserves, bringing the total to $44.513bn in FX by the end of November. In a recent report on monetary policy issued on Monday, the CBE added that the current account deficit continued to narrow in Q1 of 2018 on annual terms for the sixth consecutive quarter, however, the pace of improvement lost momentum for the second consecutive quarter. "While the contribution of the non-hydrocarbon trade deficit roughly stabilised, a less favourable contribution from net services receipts, remittances, and net income payments have more than offset the more favourable contribution from the hydrocarbon trade deficit," the CBE stated. The CBE pointed out that, overall, net imports of goods and services deficit continued to narrow in Q1 of 2018 for the fifth consecutive quarter, as higher exports of goods and services continued to more than offset higher imports. Despite higher oil prices, which increase the value of hydrocarbon exports and imports, the hydrocarbon trade deficit resumed its improvement in Q1 of 2018 following its relative stability in the previous quarter, supported mainly by lower import volumes and increased domestic production, according to the report. After witnessing a gradual slowdown in its annual improvement since Q1 of 2017, the non-hydrocarbon trade deficit continued to increase slightly in Q1 of 2018 for the second consecutive quarter. Non-hydrocarbon exports contribution continued to increase for the third consecutive quarter, however, by a lesser extent compared to the annual increase in the contribution of non-hydrocarbon imports. Meanwhile, the annual pace of improvement of the services surplus continued for the sixth consecutive quarter in Q1 of 2018, albeit by a weaker momentum. The CBE explained that this was mainly due to less favourable contribution from net receipts from tourism and transportation excluding Suez Canal tolls, which have more than offset the more favourable contribution from Suez Canal tolls, net other services, and net government services. On the other hand, the annual drop in net foreign direct investment inflows narrowed significantly in Q1 of 2018, compared to the previous quarter. Meanwhile, net portfolio inflows, which weakened in Q4 of 2017, regained momentum in Q1of 2018. This was supported by net portfolio inflows, excluding bonds, as well as by the issuance of $4bn Euro-bonds in February 2018.
