By Alexander Dziadosz and Asma Alsharif
CAIRO, March 4 A slide in Egypt's foreign
reserves slowed sharply in February, central bank data showed on
Monday, but their low levels kept Cairo under heavy pressure to
secure an IMF loan.
The central bank, which has been tightly rationing dollar
supplies, said on its website that reserves slipped to $13.5
billion at the end of last month from $13.6 billion at the end
February's drop was marginal compared with the $1.4 billion
dive in January, which was exacerbated by a $650 million debt
repayment to the Paris Club of creditor nations.
However, reserves remain under $15 billion, a figure that
would cover just three months' imports. "Egypt's foreign
exchange reserves are still extremely low and below what the
central bank previously called a critical minimum level," said
William Jackson, an economist from Capital Economics.
"At the moment they are managing to stem the decline in
reserves by tightening capital controls but this is
unsustainable in the long run," he added.
Reserves now stand at little more than a third of the $36
billion Egypt held immediately before the popular uprising that
removed President Hosni Mubarak from power in February 2011.
Egypt's Islamist government has produced an economic reform
plan which it wants to use in negotiating a $4.8 billion loan
with the International Monetary Fund. The deal was agreed in
principle in November but put on hold at Cairo's request during
street violence the following month.
When the central bank began currency auctions in late
December, it sold $75 million to commercial banks daily.
However, those sales have dwindled to just three a week, with
the amount on offer reduced to about $40 million.
Egypt's pound has lost more than eight percent against the
dollar since the currency auctions began.
While this slide has slowed in recent weeks, Jackson said
the central bank is not well prepared for any big drop in the
pound provoked by a deepening of the rift in Egyptian politics
between the ruling Islamists and opposition parties, most of
which say they will boycott parliamentary elections to be held
between April and June.
"Our bigger concern is if there is a fresh eruption in
political turmoil, and investors and Egyptians lose confidence.
This could put such pressure on the pound that the central bank
could not support it with its limited reserves," he said.
Visiting U.S. Secretary of State John Kerry said at the
weekend that it was "paramount, essential, urgent" to steady the
Egyptian economy and urged political parties to unite in
supporting an IMF deal.