March 7, 2011 / 6:55 PM / in 7 years

UPDATE 1-Egypt's foreign reserves plunge $1.7 bln in Feb

   * Plunge reflects pressure on pound currency
* Analysts say fall limited compared to scale of outflows
* Balance of payments to swing sharply into deficit
  (Adds central bank and analyst comments, background)
 By Patrick Werr
 CAIRO, March 7 (Reuters) - Egypt's net foreign reserves
plunged by $1.69 billion in February, their biggest one-month
decline in over a decade as political turmoil drove capital out
of the country and put pressure on its currency.
 The central bank played down the decline but analysts said
the figure did not seem to reflect the full extent of capital
outflows from the Egyptian economy. 
 A fall in the reserves is the best proxy for the cost under
Egypt's managed float of moderating the pound's EGP= fall over
the past month -- around 1.4 percent compared to a roughly 5
percent fall in the reserves.
 The street protests that began on Jan. 25 and eventually
toppled President Hosni Mubarak scared away tourists, foreign
investors and to a lesser extent remittances from workers
 Reserves fell to $33.32 billion at the end of February from
$35.01 billion a month earlier, the central bank said on its
website on Monday. 
 "It was not big, considering what Egypt just went through,"
central bank deputy Governor Hisham Ramez said by telephone. 
 He declined to go into specifics on how the reserves were
drawn down.
 The central bank intervened aggressively on Feb. 8 to
support the pound and at the time one trader estimated the size
of the intervention at "not less than $1 billion and not more
than $1.6 billion." [ID:nLDE71812B] 
 Analysts and bankers said both Egyptians and foreigners
transferred large amounts of money out of the country in
 Some 22.5 billion pounds in treasury bills matured in
February, and bankers said few foreign investors rolled over the
portion they were holding, but rather cashed out and transferred
the funds into dollars and out of the country.
 Foreign investors, taking advantage of high yields and a
relatively steady currency, had been avid buyers of Egyptian
treasury bills, and at the end of November held bills worth
61.30 billion Egyptian pounds ($10.4 billion), according to
central bank figures.
 A central bank statement estimated on Saturday that the
balance of payments would have have a deficit of $3 billion in
the Jan-March quarter compared to a surplus of about $557
million in the Oct-Dec quarter.
 Before the crisis, Egypt had been receiving about $1.15
billion a month from tourism, $375 million a month from foreign
direct investment and $1 billion a month from worker remittances
and other private transfers, according to central bank figures.
 (Editing by Patrick Graham)

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