Egypt central bank reduces amounts offered at daily dollar auctions

Reuters, Wednesday 9 Jan 2013

Following $2.5 billion aid injection from Qatar, Central Bank of Egypt reduces amount of dollars offered for sale in Wednesday auction to $50 million

Egypt central bank
Egypt central bank (Photo: Reuters)

The Central Bank of Egypt (CBE) reduced the size of its offering in its daily foreign currency auction on Wednesday, a day after Qatar threw Egypt an economic lifeline by sending $2.5 billion in aid to help the country contain an ongoing currency crisis.

It is the second reduction since the bank introduced a new regime for buying and selling the Egyptian pound after its recent statements that Egypt's foreign reserves had fallen to a critical minimum.

The bank offered $50 million to banks on Wednesday, less than the $60 million offered on Sunday and Tuesday and the $75 million offered at each of four auctions last week. Both 1 and 7 January were bank holidays.

It will bring the total amount of foreign currency sold in the auctions to $470 million.

Analysts say the influx of Qatari money will give Egypt breathing space and prevent a disorderly fall in the local currency.

The CBE has spent more than $20 billion worth of foreign reserves to support the Egyptian pound since a popular uprising against Hosni Mubarak in early 2011 spooked both tourists and foreign investors. Reserves stood at $15 billion as of the end of December.

Qatari Prime Minister Sheikh Hamad announced the new aid after meeting Egyptian President Mohamed Morsi. Qatar had already provided Egypt with another $2.5 billion since the uprising.

The new currency regime, introduced on 30 December, also includes a series of measures to dampen demand for foreign currencies, including limiting cash withdrawals from banks.

It came after political turmoil in recent weeks over a new constitution had sent worried Egyptians scrambling to sell local currency.

The CBE said on Saturday that foreign reserves were now at a critical level and could barely cover three months of imports.

Since then, the Egyptian pound has weakened by about 4.6 per cent on the interbank market.

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