Egypt's foreign reserves dropped to US$18.12 billion at the end of December from $20.15 billion a month earlier, the Central Bank said on its website on Thursday.
Economic experts attributed the continuing decline in foreign reserves to a 32 percent fall in tourist activities from 2011, a drop in direct foreign investments, decreasing exports and increasing imports. They said that these factors in combination affect the Egyptian pound's exchange rate, thus prompting the Central Bank to intervene to support the currency.
The experts warned that continued drops in foreign reserve may drive international institutions to lower Egypt's credit rating. They also cautioned that the country might be unable to settle its debts or support its local currency, and that interest on foreign loans might rise, with a possible change in the World Bank's lending terms.
On 30 December, Fitch Ratings downgraded Egypt's sovereign debts ratings from BB to BB-, due to political tensions and declines in its currency reserve. The downgrading was accompanied by a negative outlook.
Egypt's foreign reserves fell by half over last year, dropping to $18.12 billion in December 2011 from $36 billion in December 2010.
