x Abu Dhabi, UAEWednesday 17 January 2018

Egypt seeks to reassure foreign investors

Foreign investors can access a repatriation fund to exit the Egyptian financial market, says the central bank governor, in an attempt to allay concerns about getting cash out of the country.

Egypt's fiscal crisis has worsened since the 2011 revolution. Above, protesters rally in Cairo against a visit by an IMF delegation for talks on loans needed to lift the economy out of crisis. Khaled Desouki / AFP
Egypt's fiscal crisis has worsened since the 2011 revolution. Above, protesters rally in Cairo against a visit by an IMF delegation for talks on loans needed to lift the economy out of crisis. Khaled Desouki / AFP

Egypt set up a repatriation fund to allow foreign investors to exit financial markets, the central bank governor said yesterday, in an attempt to allay concerns over getting money out of the country.

Hisham Ramez was responding to comments made by an official from the equity index provider MSCI last week about how the company had received reports of investors having difficulties repatriating cash.

"There is no problem with their exit," said Mr Ramez, speaking on the sidelines of an Arab Monetary Fund meeting of central bank governors in Abu Dhabi. "The Central Bank reopened the repatriation fund in March for any new funds coming into the stock market or fixed income side. So people coming into the market starting March can go to the repatriation fund and go out anytime with their foreign currency."

Egypt's benchmark EGX 30 is down nearly 15 per cent since the start of the year as worries about political instability continue to spook investors.

The market recovered on Thursday after dipping more than 2.5 per cent on Wednesday in the wake of the comments to reporters by the MSCI managing director Remy Briand. He was quoted by Reuters as saying the company had been told by clients about problems with currency availability when trying to take money out of Egypt.

Foreign investors have been taking advantage of the slide in Egyptian shares. Non-Arab foreign investors are net buyers of shares valued at 236 million Egyptian pounds (Dh123.9m) this month, according to data compiled by Bloomberg.

Still, foreign positioning was nil in the treasury bill market and 30 to 40 per cent down in the equity market and eurobonds compared to before the revolution in February 2011, estimates Jean-Michel Saliba, an economist covering Eastern Europe, Middle East and Africa at Bank of America Merrill Lynch.

The decline in investor sentiment reflects the depth of the fiscal crisis Egypt has plunged into since then. More than US$20 billion in foreign-currency reserves have been run down, the budget deficit has widened to 11 per cent of GDP and Egypt's currency has plummeted.

A $3 billion injection of cash from Qatar last month helped to lift Egypt's net foreign currency reserves to $16.04bn last month.

Asked if he was happy with the level of the reserves, Mr Ramez, said: "I will only be happy when the reserves grow by the economy, not by deposits."

The deposit from Qatar follows a $2bn loan from Libya the previous month. But with much of the debt short-term, analysts say the aid is likely to form only a stopgap until a $4.8bn loan from the IMF is agreed.

"Though Arab aid would likely be rolled over upon need, it adds to the need for an IMF loan to restore macro stability, portfolio flows and strengthen the external position before then, in our view," said Mr Saliba in a research note last week.

 

tarnold@thenational.ae