Egypt's foreign reserves drop slightly to $13.4B in March

Apr 04, 2013, 2:06 PM EDT
An Egyptian woman walks past an exchange store in the capital Cairo on January 6, 2013.
AFP/Getty Images

CAIRO (AP) — Egypt's foreign currency reserves dropped slightly again last month, the Egyptian central bank said Thursday, part of a two-year downward trend to a critical level that imperils imports of vital goods like food and fuel.

The $13.4 billion level at the end of March was just below the February figure of $13.5 billion, representing a smaller drop than previous months. The nation's reserves have fallen sharply from $36 billion since the popular uprising in 2011 that ousted President Hosni Mubarak. Constant unrest since then, accompanied by frequent violence, has frightened off tourists and potential investors, cutting deeply into Egypt's foreign currency income.

The Egyptian government is in talks with the International Monetary Fund to secure a $4.8 billion loan to bolster the country's battered economy and help cover a widening budget deficit. The talks have dragged on for more than a year.

Egypt's Planning Minister Ashraf el-Araby said Thursday that a final agreement with the IMF could be reached in the next two weeks.

El-Araby said the government has discussed adjustments it made to its economic and social plan with the visiting IMF delegation in meetings in Egypt since Tuesday.

He said Egypt has not asked for an increase in the size of the loan, the state news agency reported.

"The funding gap is being discussed. This gap will determine the value of the loan Egypt asks from the IMF," al-Araby said in comments carried by the state news agency.

Negotiations with the IMF have stalled several times since early 2012, largely over expected austerity measures in a highly polarized political atmosphere.

It is considered difficult for Egypt's leadership to introduce austerity measures likely to be unpopular among Egyptians, like cuts in subsidies for fuel and food that would create hardships for Egypt's already beleaguered population. More than 40 percent of Egyptians live near or under the international poverty line of $2 a day per person, according to the World Bank.

In another indication of the crumbling economy, the Egyptian pound has lost more than 10 percent of its value to the dollar since late last year. That has put further pressure on the budget, as Egypt is the world's largest importer of wheat and also brings in significant amounts of fuel.