CAIRO, Jan. 7 (Xinhua) -- Egypt's foreign currency reserves dropped by 4.4 percent to 42.5 billion U.S. dollars in December 2018, compared with 44.5 billion dollars in November, Central Bank of Egypt (CBE) said on Monday.
In a statement on its website, the CBE attributed the recent drop in the foreign currency reserves to the government's payment of loan interest and treasury bills to foreign investors.
Egypt's forex reserves kept declining from 36 billion dollars in January 2011, just before the uprising that ousted former President Hosni Mubarak, until dropping to an alarming level of 13.5 billion dollars in February 2013, a few months before the ouster of former Islamist President Mohamed Morsi.
Over the past few years, Egypt has been suffering an economic recession due to political instability and relevant security issues that led to the decline of tourism and foreign investments, two major sources for Egypt's foreign currency reserves.
But Egypt's forex started to gradually recover under President Abdel-Fattah al-Sisi, who was backed by some oil-rich Gulf countries, including Saudi Arabia, the United Arab Emirates and Kuwait, which have provided financial support.
Improving the security condition, increasing remittances of Egyptian expatriates abroad as well as more foreign loans and deposits have refilled the CBE with foreign funds.
To boost the economy, bolster forex and contain dollar shortage, Egypt started in late 2016 a strict three-year economic reform program including imposing austerity measures, fuel and energy subsidy cuts and tax increases, in addition to local currency's full floatation that led to nationwide price hikes.
Egypt's reform program is encouraged by a 12-billion-dollar loan from the International Monetary Fund.
Egyptian economist Walid Gaballah said the level of Egypt's monetary reserves is very safe, "especially as it covers about nine months of imports."
"The cash reserve was increasing to reach 44.5 billion dollars, an unprecedented figure, and then saw a 2-billion-dollar drop amid the turbulence of the global market, a decline chosen by Egypt instead of issuing treasury bonds in the global market on terms that it cannot accept," Gaballah told Xinhua.
"We should not worry about a limited and temporary decline, which is used for economic purposes, taking into account that Egypt has exceeded the safe rate of reserve very significantly," he said.
Gaballah pointed out that the increase in cash reserves in 2018 confirms the success of the policy of the CBE, which led to the return of foreign currency to the banking system.
The country's forex reserves increased by 15 percent in 2018 to 42.5 billion dollars by the end of last year. It stood at only 37 billion dollars in a year ago.
Gaballah noted that Egypt is working in all ways to create a large cash reserve, adding that it has taken measures to rationalize imports and increase exports.
"It also succeeded in activating tourism which has started to revive," he added.