Egypt’s foreign exchange reserves fell by $2bn in May to $35.5bn after it paid back external debt, i.e., a coupon on its sovereign Eurobonds and a principal and interest payment on debt owed to the IMF.  Egypt said that the remaining holdings are “within all adequacy measures” and cover around five months of merchandise imports. This is second time its forex reserves have fallen this year and is down $5.5bn since end-2021. The decline in forex reserves has reawakened the warning of Moody’s in May where the rating agency said that there was a “significant narrowing in the foreign-exchange reserve buffer to meet upcoming external debt service payments”. Egypt has been under the pump in recent times after the Russia-Ukraine war hurt its grain imports due to record high prices as the Arab nation previously bought most of its wheat from Russia and Ukraine. The nation recently won pledges of more than $20bn in deposits and investment from Saudi Arabia, UAE and Qatar, and has also requested discussions on a new program with the IMF.

Egypt’s dollar bonds were trading weaker with its 6.875% 2040s down 0.4 points to 71.36, yielding 10.44%.

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