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Egypt central bank reduces amounts offered at daily dollar auctions

Arab World Materials 10 January 2013 09:18 (UTC +04:00)
Egypt central bank reduces amounts offered at daily dollar auctions
Egypt central bank reduces amounts offered at daily dollar auctions

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 Al Ahramonline reported

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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