Higher Foreign Currency Reserves help Egypt keep emerging market tag

Investors in Egypt’s stock market can heave a sigh of relief: index compiler MSCI is no longer considering removing the Arab country from its much coveted emerging markets list – a move that would potentially have led to the withdrawal of millions of dollars in foreign investment benchmarked to such indexes.

MSCI a year back had put the country on notice for potential reclassification amid worries about its foreign-currency situation, which, it said at the time, could worsen and result in the inability of international investors to repatriate their funds. After all, the country’s reserve levels had tumbled to $16 billion from $36 billion before the uprising in 2011.

Egypt’s foreign reserves have since improved to about $17.3 billion at the end of May on the back of billions of dollars in deposits and aid from its Gulf neighbours such as Saudi Arabia and the U.A.E. – received after the military there removed in July the Muslim Brotherhood-backed Mohammed Morsi as president.

More importantly, the former military chief Abdel Fattah Al Sisi has now been elected as president and many investors expect a period of stability and growth for Egypt, again likely backed by billions of dollars in Gulf cash.