Egypt‘s reserves of foreign currency did not decline significantly in March even though $1.3 billion of hard currency was used for imports including essential commodities and oil, the central bank said.
The reserves stood at $13.5 billion at the end of February – barely enough to cover three months of imports to the country of 84 million that buys much of its food and fuel from abroad. The March figure is due out next week.
Two years of instability since Hosni Mubarak was swept from power have battered Egypt’s economy and foreign reserves, which had stood at $36 billion on the eve of the uprising that toppled him.
The central bank made its comments in a statement on Thursday denying an Egyptian newspaper report claiming Governor Hisham Ramez had told President Mohamed Mursi that the bank could not supply foreign currency to import basic goods.
Shortages of imported fuel are disrupting Egypt’s economy, leading to power cuts and long queues at petrol stations for subsidized diesel that some are now hoarding at home. Egypt has also cut back on purchases of imported wheat this year.
The central bank said that the $1.3 billion had gone towards imports including basic commodities and petroleum products.
“Despite that, the reserves of foreign currency at the central bank did not witness a significant decline during March,” it said, attributing that to good management of foreign currency resources and uses.
The statement added that the central bank had not received any deposits from “friendly states” in February and March. The Gulf state of Qatar deposited $4 billion in Egypt’s central bank last year to help support the Egyptian economy.
Seeking to ration dollars, the central bank introduced a system of foreign exchanges auctions in late December, since when the Egyptian pound has lost 9 percent of its value.
The authorities are giving priority to importers of essential goods, leaving other importers to meet their hard currency needs on a black market that has taken root this year.
Egypt is seeking a $4.8 billion IMF loan to help plug a gaping budget deficit and address the foreign exchange crisis. Agreement on a loan would unlock billions of dollars of aid from other states and international institutions.
The International Monetary Fund said on Thursday it would visit Egypt in the “first days of April” for talks with the government on a possible financing program.
In Cairo, government spokesman Alaa El Hadidi said the IMF would return “some time next week”.
President Mohamed Mursi‘s government initialed a deal with the IMF last November but postponed final ratification in December in the face of political unrest.
Masood Ahmed, director of the IMF’s Middle East and Central Asia department, visited Cairo on March 17, saying the Fund would continue talks aimed at agreeing possible financial aid.
The government sees its budget deficit hitting 10.9 percent of GDP in the year to the end of June, assuming it carries out economic reforms to curb spending. Without such reforms, the government says the deficit will hit 12.3 percent of GDP.
Cairo has been reluctant to impose austerity measures which an IMF deal may require, for fear of igniting further unrest.
However, Egyptian Planning Minister Ashraf al-Araby said last week that he expected Cairo to sign an IMF deal by the end of June and to have received the first tranche of a loan by then.