Why does Egypt buy gold? – BBC News Arabic

  • Ahmed Shousha
  • BBC News Arabic – Cairo

8 minutes ago

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Egyptian Central Bank

Egypt became the largest buyer of gold among the central banks in the world during the first quarter of this year, amid a state of economic instability as a result of the Russian war in Ukraine, the effects of which are suffering on the Egyptian and global markets, and the absence of official information about the Egyptian demand for the yellow metal at this time.

A report issued by the World Gold Council a few days ago indicated that the Central Bank of Egypt bought 44 tons of gold last February, bringing its total holdings by 54% and up to 125 tons, which is equivalent to 17% of the total Egyptian reserves. highest among the countries in the region.

The World Gold Council is made up of leading gold mining companies and was established in 1987 and is headquartered in London.

The Central Bank of Egypt has not issued any data about gold purchases or an explanation of the reasons for its trend in this regard, and it has not responded to a question from the BBC in this regard so far.

A member of the Egyptian Association for Economics and Legislation, Dr. Mohamed Anis, criticizes the lack of information after every major purchase, stressing the importance of transparency for the markets.

Anis explains to the BBC that some information is decisive to judge buying decisions, such as its timing if it was before the start of the war on February 24 or after, because if it was before that, it may be considered a safe haven, as gold prices rose a lot later.

And a member of the Egyptian Association for Economics and Legislation adds that other questions are necessary in this regard, saying: “It is important to know whether the purchase is in dollars directly or in other currencies such as the euro, because there are currencies that have declined, and were Gulf deposits in Egypt, for example, gold instead of dollars? Is buying mostly Local in Egyptian pounds?

diabetes mine

Egypt produces nearly 16 tons of gold annually, most of which comes from the Sukari mine in the Nuba desert, according to statistics from the Egyptian Ministry of Petroleum and Mineral Resources.

The Egyptian government’s interest in local gold production and the purchase of a quantity of it on a monthly basis from the company that owns the Sukari mine concession has increased since 2017, and this was reflected in its gold reserves.

Sahar El-Damaty, former Vice President of Banque Misr, attributed the Central Bank’s tendency to buy gold to boost the reserves due to the fluctuation of the value of currencies.

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Sisi: “I ask about the prices of foods on my table.” He calls on citizens to save money on buying because of the high prices

Al-Damaty told the BBC: “In the recent period, we have found countries such as Russia, Saudi Arabia and China doing trade in currencies other than the dollar, and these systems, if they are installed, will affect the volume of exchange in dollars. Therefore, gold is an essential step to enhance countries’ reserves if currencies fluctuate,” as she put it.

“The dollar is better than gold”

Hani Tawfik, the former head of the Egyptian and Arab Investment Associations, differs, however, as he believes that the current time is the most appropriate time to sell gold and not to buy it because of its high price and the critical economic situation.

“It was better to invest in the dollar because it does not face risks now and encourage investment to increase exports and bring in foreign currencies,” Tawfiq explains to the BBC.

It is noteworthy that the Egyptian foreign exchange reserves decreased by about $3.9 billion, or 9.5%, to reach nearly $37 billion at the end of last March.

The Central Bank of Egypt attributed the reasons to the difference in the value of foreign investments, the repayment of the state’s external debt, and the use of part of the cash reserve to cover the needs of the Egyptian market, in what it called “confronting the shock of international markets.”

The annual inflation rate in Egypt rose to its highest level since June 2019, reaching 12.1% in March, compared to 4.8% in the same month last year. Egypt also recorded an increase in the monthly inflation rate by 2.4% in March from the previous month.

Egypt was affected by the Russian invasion of Ukraine on the economic level, as the value of the local currency declined, and the tourism rates on which the country relied declined.

The so-called economic reform program that Egypt has implemented for several years has led to a clear increase in indicators measuring the performance of the Egyptian economy, such as the gross domestic product, which reached $408 billion at the end of the last fiscal year, which refers to the value of all goods and services produced within the country during During a period, the growth rate reached 3.3 percent, despite the repercussions of the Corona epidemic.

foreign investment

Nasser Qalawun, a former professor of political economy at the Universities of London and Exeter, believes that the Central Bank of Egypt’s tendency to buy gold comes partly to cover the currency and to encourage foreign investors with a message that “it has courage and an integrated policy to fight inflation and strengthen its reserves, as Turkey does,” as he put it.

During the past few years, many investments exited Egypt after the US Federal Reserve’s decision to raise the interest rate. However, Egypt subsequently received dollar deposits from Gulf countries and sold government stakes in Egyptian companies.

Egypt topped the list of buyers in the World Gold Council’s report for the first quarter of this year, followed by Turkey, India and Ireland. However, Kazakhstan came in first place at the level of sellers, followed by Uzbekistan and then Qatar.

The council’s report is still the Source of all this information about Egypt’s desire to buy gold to support the reserves, without any clarification from an Egyptian side with details that may help investors understand the monetary and economic policies of the Egyptian government and ease the controversy – at least among experts – about the extent of the impact of this step, positively or negatively. on the Egyptian economy.

The article is in Arabic

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