Seasonal factors influence decline in Egypt’s foreign assets, NFAs drop 12.2% in December: CBE

Cairo – February 6, 2025: In December 2024, Egypt's banking sector experienced a significant drop in net foreign assets (NFA), with the figure falling to $5.23 billion, a 12.2 percent decrease from November's $5.96 billion, according to the latest data from the Central Bank of Egypt (CBE).

This follows a sharp 35.2 percent decline in November, driven by heightened demand for foreign exchange (FX) resources, marking the third consecutive monthly decrease.

The primary driver of the decline was a widening deficit in the net foreign assets of commercial banks, which grew to $6.4 billion in December, up from $5.8 billion in November. This increase in deficit was largely due to a rise in foreign liabilities at commercial banks, which surged to $29.6 billion during the same period.

The decline was likely influenced by seasonal factors, as Egypt typically experiences a rise in its import bill a few months before Ramadan. This increase coincides with greater demand for foreign exchange, driven by businesses preparing to distribute dividends to foreign investors at the close of the year.

Additionally, the holiday season typically brings a rise in outbound tourism, driving up the demand for foreign currency to cover travel costs and related expenses.

On the other side of the ledger, the CBE reported a slight dip in its own net foreign asset surplus, which fell to $11.7 billion in December, down from $11.8 billion in November. Although foreign assets increased to $45.76 billion, the rise in foreign liabilities to $34.1 billion tempered the surplus.

Despite the recent downturn, Egypt's NFA position is expected to improve in January 2025, thanks to a $2 billion international bond sale.

Speaking to Reuters, analysts expect the bond issuance, which included $1.25 billion in five-year notes with an 8.625 percent yield and $750 million in eight-year debt yielding 9.45 percent, to provide a much-needed boost to the country’s foreign currency reserves.

The CBE also recently announced plans to issue $1 billion in one-year dollar-denominated treasury bills in early February 2025, part of ongoing efforts to secure foreign currency liquidity.

This move follows Egypt's last dollar bond issuance in 2023, when it raised $1.5 billion through its inaugural Islamic Sukuk offering, and the country’s previous conventional bond sale in September 2021, which raised $3 billion.

The Egyptian pound stood at a stable 50.28 against the USD on Thursday afternoon.