• Since December 2011, foreign reserves have fluctuated without exceeding $20bn
  • Imports outweighed exports by $29.6bn, or 23 per cent, in the first nine months of the past fiscal year

Egypt’s president Abdul Fatah al-Sisi has supported the policies of the central bank following a statement released from the president’s office on 4 October.

Egypt should “rationalise imports from abroad” to ease the burden on the state’s foreign currency resources said the statement. Egypt imports “many non-essential products that have local alternatives that offer higher quality and competitive prices,” the presidency added.

Egypt’s central bank has been limiting the supply of dollars into the market recently as foreign currency reserves fell in the past four years.

Since December 2011, foreign reserves have fluctuated without exceeding $20bn, which is where its net international reserves sat in June this year.

With Egypt it is essential to look at the net foreign assets figure, which excludes central bank loans and therefore provides a more accurate picture of the central bank’s reserve capacity.

Egypt’s net foreign assets sat at $2.7bn in June this year despite net foreign reserves being $19bn. In June 2010, there was only a $1bn deficit between net reserves and net foreign assets, indicating a drastic change in the nature of reserves.

The central bank’s policies have been problematic for Egyptian industries and foreign investors who have found it difficult to manage dollars with controlled supplies and limited dollar deposits in local banks.

The president’s statement suggests a limiting of non-essential imports for local companies although there is no mention of the current valuation and informal pegging of the Egyptian pound to the dollar, which has negatively impacted tourism and foreign investment and Egypt becomes a more expensive market.