Egypt’s Net Foreign Assets Deficit Contracts $586m in April
Egypt’s net foreign assets (NFAs) deficit contracted by $586m in April, marking the third consecutive month of decline, according to data released by the central bank. The end-April NFA deficit shrank to EGP174bn Egyptian pounds ($3.68bn) from EGP200bn pounds at the end of March. This contraction comes after the International Monetary Fund (IMF) paid an $820m loan installment to the country earlier in the month.
The reduction in the NFA deficit can be attributed to various factors, including the $8bn financial support package Egypt signed with the IMF in March. This agreement led to a significant influx of portfolio investments and remittances from workers abroad. Additionally, a $24bn real estate investment from the UAE contributed to shrinking the NFA deficit by $17.8bn in March and $7.04bn in February.
Egypt received a total of $24bn from the UAE for the development rights to land on the Mediterranean coast, with the final installment of $14bn arriving in early May. Commercial banks saw an increase in foreign assets by $606m in April, while their liabilities rose by $653m. At the same time, the central bank’s foreign assets rose by $1.02 billion, while foreign liabilities declined by $393bn.
The NFAs, which represent central bank and commercial bank assets held by non-residents minus their liabilities, have been a crucial factor in supporting Egypt’s currency. Prior to the IMF agreement, the central bank had been drawing on NFAs for over two and a half years. In September 2021, NFAs stood at a positive $3.9bn.
The positive trend in Egypt’s NFA deficit contraction reflects the country’s efforts to stabilize its financial position and attract foreign investments. The collaboration with the IMF and the significant support from the UAE have played a vital role in this process, setting a positive trajectory for Egypt’s economic outlook.
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