CAIRO — Egypt's net international reserves fell $2 billion in April, the fourth consecutive month of declines, Central Bank data posted Thursday showed, as the nation's economy reels from the aftereffects of the mass uprisings that toppled former president Hosni Mubarak.
Net international reserves fell to $28 billion in April from $30.1 billion the previous month, according to data published on the Central Bank's website. The country has seen its foreign reserves drop by about $8 billion since December, the month before the protests that ousted Mubarak began, thrusting Egypt down a path of political uncertainty and economic doldrums.
The drop, which brings the reserve levels to their lowest in over three years, underscores the dire challenges confronting officials who are struggling to reform the political process amid continuing labor protests and unrest that has shattered economic growth forecasts for the current fiscal year. Analysts have predicted foreign reserves will fall as officials look to offset a steep drop in tourism revenues and foreign direct investment — two mainstays of the economy."
"Given the capital outflows that we have seen so far, I'm not surprised that foreign reserves have fallen by this much and I would not be surprised if we see a bit more of a decline," said John Sfakianakis, chief economist with the Riyadh, Saudi Arabia-based Banque Saudi-Fransi. "At the same time, although reserves have fallen from $36 billion, I don't think they are at a level that creates systematic risk."
In the weeks since the start of the Jan. 25 mass uprising, Egypt's economic growth forecasts have been slashed from nearly 6 percent for fiscal 2010-2011 to roughly 2.5 percent.
More broadly, some analysts expect to see a contraction of as much as 2.5 percent for calendar year 2011, a drop fueled by the erosion of tourism revenues, a scramble by foreign investors to pull their money from the country and a sharp drop in exports and manufacturing.
In addition, the Egyptian pound has faced steady depreciation pressure, flirting with the 6 pounds per dollar mark several time over the past couple of months and forcing the Central Bank to intervene at least once to support it.
The current government, backed by the country's new military rulers, has struggled to cap the unrest.
It has repeatedly urged people to return to work and help them restore some semblance of normalcy to the country's daily life while it revamps a political process viewed for years as favoring a smattering of wealthy businessmen and officials linked to the now defunct ruling National Democratic Party.
But Egyptians, distrustful of officialdom after three decades of life under Mubarak's rule, have pressed the government for immediate progress, including major increases in the pay for public sector company employees — even as government revenue is declining.
The country on Thursday was auctioning off 6 billion pounds in Treasury bills, the latest attempt to raise money. But at least two earlier T-bill auctions fell short of the mark as yields climbed sharply amid investor concerns about the country's political stability.
Analysts say, however, that as more clarity emerges with the expected parliamentary elections in September and presidential elections possibly as early as November, some of the fiscal pressures may ease.
The foreign reserve decline should be "a wake up call because capital outflows are happening as a result of the political turmoil," said Sfakianakis. "But now that there is a little bit more clarity due to the announced parliamentary elections, there should be a little bit more moderation in capital outflows."