Egypt’s foreign reserves rose slightly last month, central bank data showed on Sunday, their first gain since a popular uprising unseated the country’s autocratic leader and sent the economy into a tailspin.
The central bank has spent heavily to support Egypt’s currency through the political turmoil since Hosni Mubarak’s overthrow in February 2011, which prompted foreign investors to scurry for the exit and hammered tourism.
Foreign reserves - which stood at $36 billion in December 2010 and fell every month since the uprising began - edged up to $15.21 billion at the end of April from $15.12 billion at the end of March, the bank said.
Some economists are expecting a sharp drop in the pound as reserves appear close to danger level and long-awaited help from foreign donors including the International Monetary Fund has been repeatedly delayed.
Few are willing to rule out a devaluation for now and foreign participation in Egypt’s stock market remains small, but a partial recovery in tourism and a tendency for Egyptians to keep bank deposits in local currency are positive signs.
“We are less worried about the decline in reserves than the markets seem to be,” Renaissance Capital said in a recent research note. “We still see a lower probability of devaluation or depreciation in the short term.”
It said it still expected Egypt to seal a long-delayed $3.2 billion loan from the IMF and reserves could also be helped by incoming foreign investment such as France Telecom’s planned purchase of Mobinil shares.
Saudi Arabia’s ambassador was returned to Cairo on Sunday after a rare diplomatic row between the allies, caused by the arrest of an Egyptial lawyer in the kingdom. The ambassador confirmed the oil-rich Gulf state would this month provide financial assistance to Egypt that it has been promising for a year.
Egypt’s economic challenges remain daunting.
Street clashes in Cairo have overshadowed the build-up to a presidential election that would be the climax in a transition from military to civilian rule.
The army-backed interim government is at loggerheads with an Islamist-dominated parliament, making it hard to formulate coherent policies to tackle Egypt’s economic woes.
And whoever comes to power in July after the election will face little alternative to hugely unpopular taxes and cuts in government spending to reduce budget and balance of payments deficits inflated by a year of political and economic turmoil.