Foreign assets deficit continues to widen in banks

Exit of foreign capital from emerging economies trailed in October at slower pace since April 2018: CBE

The deficit of foreign assets, banks' balances of foreign currencies with banks operating in the Egyptian market, rose for the fifth consecutive month to about EGP 131.52bn, according to the Central Bank of Egypt (CBE).
In a recent report, the CBE said that the deficit was the result of a decline in the volume of foreign assets at banks, equivalent to about EGP 17.95bn to reach EGP 201.3bn, as well as obligations on banks in foreign currencies rising by EGP 14.29bn to EGP 332.9bn.
Analysts attributed the deficit in net foreign assets of banks to the continued exit of foreigners from government debt instruments, in the wake of the emerging market crisis since April 2018, in addition to the US Federal Reserve hiking interest rates on the US dollar.
At the same time, the report revealed the decline in net foreign assets of the CBE to EGP 275.8bn at the end of November 2018, down from EP 287.1bn in October 2018, thanks to the assets stabilising at EGP 784.25bn, while obligations grew by EGP 11.47bn, to EGP 508.4bn.
In November 2018, the CBE implemented a bonds repurchase agreement worth $3.8bn after paying $3.1bn in the same month.
The CBE predicted an exit of short terms predefined obligations in November 2018 worth $313.3bn, against an inflow of $1.13bn in the same month.
Foreign investments in treasury bills (T-Bills) have fallen by about $888m in November 2018 to $10.819bn, from $11.707bn in October 2018. Egypt lost foreign investments in T-Bills amounting to about $10.687bn since April 2018.
The CBE noted that the foreign capital outflows from emerging economies continued in October for the ninth month in a row, but at a slower pace since the wave began in April 2018.
It pointed out that the exit of foreign capital was the result of concerns about the outlook for the growth rate of economic activity in emerging countries, as well as the tensions related to global trade policies and constrained global financial conditions, and the weakness of the macroeconomic structure in some emerging countries.
The CBE decided at the end of November 2018, to cancel the mechanism of guaranteeing the entry and exit of foreign investments as of 4 December 2018.
CBE Governor, Tarek Amer, said that the decision had been planned since the floating of the local currency and was to contribute to the influx of foreign indirect investment into the banking sector.