Egypt Daily News – The net foreign assets surplus in the Egyptian banking sector, including the Central Bank, increased for the second consecutive month by 17% month-on-month in February, reaching $10.172 billion, compared to approximately $8.7 billion at the end of January, according to official data published on the Central Bank of Egypt’s website.
This increase came amid a continued rise in the surplus at the Central Bank of Egypt, which, in turn, led to a rise in the overall banking sector surplus.
Net foreign assets represent what banks hold in foreign currency deposits and savings, which can be liquidated when the bank needs liquidity to meet its obligations.
Why did net foreign assets rise in Egypt?
This rise can be attributed to a 42% monthly reduction in the net foreign assets deficit of commercial banks operating in Egypt during February, which fell to approximately $1.92 billion for the second consecutive month, compared to a deficit of around $3.3 billion in January.
For the tenth consecutive month, the surplus of net foreign assets at the Central Bank of Egypt increased by 0.8% month-on-month in February, reaching about $12.1 billion, compared to approximately $11.99 billion in January.
After the fourth wave of currency devaluation in March 2024, the total net foreign assets of all Egyptian banks turned into a surplus of about $14.29 billion in May, the first surplus in nearly 28 months, after the deficit nearly reached $29 billion at the end of January 2024, before the Central Bank’s reform measures in March.
However, the foreign currency positions of commercial banks (excluding the Central Bank) turned negative in August after three months of improvement in total assets, due to pressures from dollar demand.
Return of Foreign Direct Investment to Egypt
Mohamed Abdel Aal, a banking expert, believes that the increase in net foreign assets across the banking sector indicates an improvement in the pace of foreign currency inflows to the banks for the second consecutive month in January and February.
Abdel Aal pointed out ” that this improvement resulted from several factors, notably the increase in foreign portfolio investment in local debt instruments since the beginning of the year, the rise in remittances from Egyptians working abroad, and the slowdown in import pressures due to reduced purchasing power.
Earlier, bankers said that foreigners had resumed buying local treasury bills and bonds in January and February, after a massive exit in December, which led to a drop in the dollar price from its record level of over 51 pounds to around 50.67 pounds per dollar by the end of yesterday’s trading.
According to Abdel Aal, the reduction in the worsening deficit of net foreign assets at commercial banks reflects the improvement in their foreign currency positions, due to the easing of pressures related to foreign currency against their obligations.
