Jump in Egypt foreign reserves may mask problem

Egypt’s foreign reserves rose by $302 million in May, their second successive monthly increase, but the positive number may mask a continuing deterioration in Egypt’s finances, analysts and traders said.

Foreign reserves climbed to $15.52 billion at the end of May from $15.21 billion at end-April, the central bank said.

The reserves figure apparently includes $1 billion that the central bank received from a May 15 sale of dollar-denominated T-bills to local banks, money from that came from inside Egypt and does not represent an improvement in the balance of payments.

When the central bank receives funds from T-bill sales, it transfers them to the Ministry of Finance in Egyptian pounds while keeping the U.S. dollars as foreign reserves, a Cairo-based currency trader said.

This would indicate that without the $1 billion in dollar T-bills, reserves would have fallen by $700 million, traders and analysts said, a number that suggests Egypt continues to bleed from the political and economic turmoil of the last 18 months.