Egypt Foreign Reserves up $302 Million in May

Egypt's foreign reserves climbed $302 million in May to reach $15.52 billion, their second consecutive monthly increase, boosted by Saudi aid and foreign investment inflows. The rise is however seen as unsustainable, due to unpredictable current account flows.

Foreign reserves rose from $15.21 billion at the end of April, according to figures from Egypt's central bank on Wednesday, after falling every month in the year following the country's 2011 uprising. Monette Doss, research manager at Prime Holdings, says the figures reflect the influence of regional aid. "We have seen dollars come into the central bank, where Saudi Arabia put $1 billion into the Egyptian banking sector, which mostly explains the rise," she told Ahram Online.

Actual inflows may have been significantly higher but eaten up by debt repayments related to Egypt's national oil company, according to Hany Genana, chief economist at Pharos Holdings. "Some political figures over the last week mentioned that May reserves were up $1.7 billion, which is roughly equivalent to the Saudi injection of $1 billion and tax/non-tax proceeds from the sale of Mobinil to France Telecom," he told Ahram Online. "In our view, much of this figure was probably used to settle liabilities, leaving just $300 million."

Doss added that April and May's rises may be a short-term phenomenon. "This kind of gain is not sustainable in the long-term, unless of course further payments of this type are made," said Doss, predicting at least a mild fall in foreign reserves in June. "We are not likely to see a big dip but it's possible that reserves will fall at the same rate as before, by under $1 billion a month."

Genena agrees a drop is possible but hard to foresee accurately. "It is extremely difficult to predict because we are not dealing with regular and predictable current account flows," he said. Just before the January 2011 uprising that unseated president Hosni Mubarak, the country's foreign reserves sat at around $36 billion.