Paper: Egypt army sees further drop in FX reserves

CAIRO – Egypt's foreign reserves are expected to fall by more than US$5 billion to $10.4 billion by the end of June, a newspaper quoted a top army finance official on Wednesday as saying, a sign the government plans to continue defending the currency until then.

The political and economic turmoil since Hosni Mubarak was ousted from the presidency in February 2011 has scared away foreign investors and tourists, wreaking havoc on state finances and prompting the government to seek a $3.2 billion emergency loan from the IMF earlier this year.

An IMF team is due to arrive for a new round of talks next week.

Egypt has spent more than $20 billion in foreign reserves to support the pound, which has weakened by only 3.65 percent against the dollar since last year's popular uprising, despite the loss of some of its main sources of foreign exchange.

Reserves now stand at a worryingly low $15.7 billion, equivalent to about three months worth of imports, and include $4 billion in gold bullion the government would be reluctant to draw down.

Mahmoud Nasr, assistant for financial and accounting affairs at the Ministry of Defence, made his remarks on reserves in a briefing to local media on Tuesday.

Nasr "expected that foreign currency reserves would fall from $15.7 billion now to $10.4 billion at the end of June," al-Mal wrote.

Officials of the Muslim Brotherhood's Freedom and Justice Party, which controls almost half the seats in parliament, have accused the military-apppointed government of driving the economy into the ground before it turns over power.

Nasr said the military had diverted LE12.2 billion ($2.02 billion) from its own budget to support a number of ministries, including a $1 billion loan to the Finance Ministry.

The army, which took control of the country after Mubarak's overthrow, is due to give up executive powers after the presidential election scheduled for May and June.

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