Despite the increase in foreign assets, Hani Genena warns: We should be worried about this reason

01:16 PM

Tuesday, 06 August 2024

Manal Al-Masry wrote:

Hani Genena, chief economist at Cairo Capital Securities Trading Company, warned of the increase in net foreign assets in banks amid the growth in their accumulation of hot money – foreign investment in treasury bills – and not sustainable resources amid fears that they will directly decline with the departure of foreigners.

He explained in a post on his Facebook page that the net foreign assets in the banking sector (including the central bank and banks) were around $14 billion at the end of May and $13 billion at the end of June.

The surplus of net foreign assets decreased by about 8.7% on a month-on-month basis last June to register about $13.04 billion, compared to a deficit that reached about $29 billion at the end of January last year.

Hani Genena explained that most of the attention was focused on the reduction of about a billion dollars, although it should be highlighted the 14 and 13 billion dollars.

He said the main reason behind the increase in net foreign assets after March 2024 is the money from hot cash flows.

According to Genena, most of the money from the flow of dollars to buy financial accounts is deposited abroad with the expectation that they will suddenly exit, and until that happens, they will appear among foreign assets of the banking sector.

Genena pointed out that we should be concerned and not celebrate the large increases in the net foreign asset figure if the reason for the increase is hot money and not more stable payment flows.

The departure of foreign investors in the last 3 working days of Egyptian banks caused more pressure on the pound, which led to the dollar rising to around 49.62 pounds for the first time in its history since the last decision freed the exchange rate last March, before reducing its gains by about 25 piasters yesterday and 5 piasters during trading Today but still more than 49 pounds.

In the years 2022 and 2023, Egypt suffered from a worsening foreign exchange crisis after indirect foreign investments went out to about $ 22 billion in the first half of 2022 on because of the fear of the conflict between Russia and Ukraine.

However, after the decision to free the exchange rate last March, Egypt attracted about $22 billion in foreign direct investment in the first two months of freeing the exchange rate in March and April last year, bringing the total portfolio to a record $35.4 billion.