The Central Bank of Egypt (CBE) has announced that, in continuing with the recent return of foreign investments into local debt instruments, foreigners accounted for 22.6% of treasury bills (T-bills) issuances in the first half (1H) of 2021, compared to the 7.8% recorded in the same period in 2020.
In a financial stability report issued at the end of last week, the CBE noted that the banking sector contributed to containing the sudden exit of investors from the local T-bills market thanks to the high liquidity rates in the local currency and a surplus in net foreign assets. This surplus was formed during the implementation of the economic reform programme.
It explained that net foreign assets recorded net inflows of $2.4bn during 1H 2021. As a result, the foreign currency liquidity ratio rate increased in June 2021 to 73.2%, compared to 70.3% in June 2020.
Furthermore, the ratio of household sector deposits in foreign currency to the total non-governmental deposits in foreign currency stabilised at 69% and the ratio of loans to deposits in foreign currency stabilised at 68.8% in June 2021.
The CBE stressed that this supported the Egyptian governments ability to access global financial markets, as it issued international bonds amounting to $3.8bn in February 2021 in three tranches, in addition to a previous issuance of $5bn in May 2020 immediately after the outbreak of the pandemic.
As a result of these economic and financial components, the continued confidence of foreign investors in the Egyptian economy, the stability of the credit rating, and the liquidity of the banking sector in local and foreign currencies, the consequences of the coronavirus pandemic on foreign currency resources were handled well.
This led to the continued stability of the exchange rate, a decrease in market risks in the banking sector, and an absence of systemic risks involving fluctuations of foreign capital. All of this strengthened financial stability without resorting to the macro-prudential policy.
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