Egypt’s foreign reserves fell by $5.4 billion, or 9.7%, to $40.1 billion at the end of March, a Central Bank of Egypt statement said on April 7. The central bank ascribed the decline to what it described as “an unprecedented blow to the global financial markets arising from the coronavirus epidemic spread, which resulted in the sharpest portfolio flows reversal on record from emerging markets, including the Egyptian market.”

“The central bank has utilized $5.4 billion from its net international reserves balances during March, to partially cover foreign portfolio investment outflows through the central bank’s foreign exchange repatriation mechanism and accommodate for the domestic market’s foreign currency needs to import strategic goods, as well as for the repayment of external debt service obligations,” the central bank said on its website.

Despite the decline, the central bank said that the current position of reserves remains strong, noting that it covers around eight months of Egypt’s imports.

As a result, Egypt’s economy may shrink to 3.5% of gross domestic product (GDP) this year, down from a previously expected 5.5%, on the back of the coronavirus pandemic, Alia el-Mahdi, a professor of economics at Cairo University, told Al-Monitor.