Egypt 'increases reserves by $3bn' while currency devaluation looms

Egypt 'increases reserves by $3bn' while currency devaluation looms
Egypt's central bank announces 'good news' for the country's ailing economy, but the long-term outlook remains unclear.
2 min read
04 Oct, 2016
Egypt will consider allowing the pound to float freely if reserves exceed $26bn [AFP]
Egypt's central bank said on Monday that its foreign currency reserves had jumped by $3 billion to $19.592 billion at the end of September.

At the end of August, Egypt's reserves had stood at $16.564 billion, following a steep fall in July due to debt payments owed to foreign lenders.

Before the country's revolution in 2011, Egypt's foreign currency reserves stood at around $36 billion - with this number tumbling rapidly as the nation descended into chaos and political upheaval. This greatly harmed Egypt's once-thriving tourism industry, as well as confidence among foreign investors.

With the Egyptian Central Bank having previously said that it would raise currency reserves to $25 billion by the end of the year, Monday's announcement seems like welcome news for the Middle Eastern country's disaster-stricken economy.

Yet, despite breaking the news, the ECB has yet to explain how the rise in reserves came about - especially as the news comes just days after President Abdel Fattah al-Sisi was lampooned on social media for suggesting that his country's citizens could use their spare change to fund social projects and help Egypt's devastated economy.

"Can't we take change, say 50 pence, and put it in an account to fund such housing projects?" Sisi asked.

He proceeded to give an example of when cashing a salary cheque for 1,250.80 pounds, "can't we donate that extra 80 pence or whatever?"

Read more: Egypt's Sisi wants change - your change

Meanwhile, speculation that Egypt's currency will undergo a second devaluation has not subsided. According to two traders who spoke to Reuters, the Egyptian pound reached unprecedented levels of 14.20-14.25 to the dollar on Tuesday.

The governor of Egypt's central bank has said that he will consider allowing the pound to float freely if the target of $25 billion in currency reserves is exceeded.