June 7, 2020 / 3:05 PM / a month ago

UPDATE 1-Egypt net foreign reserves drop by $1 bln in May

(Adds detail, analyst quote, background)

CAIRO, June 7 (Reuters) - Egypt’s plunging foreign reserves declined by a further $1 billion in May, the central bank said on Sunday, as the coronavirus crisis continues to pressure the economy.

Reserves at the end of May were $36 billion, down from $37 billion at the end of April, having already fallen by $3.07 billion in April and $5.4 billion in March as investors unnerved by the coronavirus pulled cash from emerging markets.

The May decline looks small compared with the previous months, but the extent of outflows could be higher if any proceeds from May’s $5 billion eurobond sale and $2.78 billion from the International Monetary Fund (IMF) was used to bolster reserves.

“For now we can assume capital flight,” said Renaissance Capital analyst Ahmed Hafez, adding that banks may have tapped central bank funds to cover some of their net foreign liabilities.

“Overall, higher than expected, but under control,” he said of the latest decline.

The central bank could not be immediately reached for comment.

The COVID-19 crisis has squeezed some of the country’s main sources of foreign currency, especially tourism and remittances from workers abroad.

“With close to $8 billion of external funding raised during the month, the net international reserves drop comes as a surprise to us,” said Allen Sandeep of Naeem Brokerage. (Reporting by Mahmoud Mourad and Patrick Werr Editing by David Goodman)

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