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Egypt pound drops further at forex auction
January 23, 2013
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CAIRO: Egypt’s pound extended losses on Tuesday at a central bank (CB) forex auction, leaving it 6.8 per cent weaker than when the sales were launched at the end of December to safeguard foreign currency reserves.

The central bank set a cut-off price at the currency sale of 6.6025 pounds to the dollar, and the pound weakened further still to 6.6354 on the interbank market.

The central bank limits trades there to a 0.5 per cent band above or below the weighted average of bids at the most recent currency auction.

Egypt’s foreign reserves have tumbled during two years of domestic turmoil. They stood at $36 billion before the uprising that toppled Hosni Mubarak and have now fallen to $15 billion, covering roughly three months of imports.

The central bank has said reserves are now at a critical level, though they have held steady for months with the help of billions of dollars of support from donors, particularly Gulf states.

Qatar has given or lent Egypt $5 billion in budget and other support.

In an initiative made public this week, the central bank said it was allowing lenders to temporarily refinance import operations for their clients, based on the banks’ evaluation of the clients’ creditworthiness.

The move is seen helping keep essential imports flowing into Egypt.

Investment bank Beltone said previous rules allowed such financing only to borrowers who could show they had the foreign currency resources to repay them at a later date.

“We expect that the temporary facilities in FX will only be provided to particular clients who are importing necessary items that go into the local production of other goods,” Beltone said.

At on Tuesday’s auction, the bank offered $75 million and said it had accepted bids worth $73 million.

Egypt’s foreign reserves have risen to $15.5 billion, helped by a deposit by Qatar to support the economy, its finance minister said, although they are still close to critical levels after being run down to defend Egypt’s currency.

The central bank put reserves at $15.015 billion at the end of December. It has implemented a new regime for buying and selling foreign currency and currency controls to try to stem a fall in reserves, which have tumbled from $36 billion before the uprising that toppled Hosni Mubarak in early 2011.

Finance Minister Al-Mursi Al-Sayed Hegazy told reporters about the new reserve figure on Saturday without giving further details about the deposit by Qatar, a generous donor to Egypt.

Qatar said earlier this month it had lent Egypt $2 billion and given it $500 million outright. It has pledged to stand by Egypt to help support the nation, which has been battered by political turmoil and violence that has scared away investors.

Reuters

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