Egypt’s Central Bank to inject dollar liquidity over next month

Egypt’s Central Bank will inject more dollar liquidity in the coming month, the presidency’s office said in a statement following a meeting on Wednesday between new Central Bank governor Tarek Amer and President Abdel-Fattah El-Sisi.

The Central Bank will hold an exceptional auction within the coming period to help meet import needs, the statement said.

The bank’s governor said foreign reserves are “reassuring” and that the current situation is stable and will see improvement, the statement added.

Egypt has since December 2012 controlled the exchange rate through weekly auctions of foreign currency, lately strengthening an overvalued pound by LE0.20 against the dollar to LE7.73, in a move which some economists saw as a blow to speculators betting on further devaluation.

The Central Bank last held an exceptional auction on 14 May 2014 for $1.1 billion to cover food import needs.

On Tuesday, the Bank announced that it had fully repaid a backlog of $547.2 million owed to foreign portfolio investors, prompting questions about where the sums were coming from.

“There is no indication of where such sources of funding are coming from,” Hany Farahat, senior economist at CI Capital, told Reuters. “It might just be more aggressive use of the reserves available at the bank.”

Egypt, which relies heavily on imports of food and fuel, saw its foreign currency reserves dwindle down from $36 billion before the January 2011 uprising which toppled  Hosni Mubarak, down to $16.41 billion at the end of October, enough to cover a little over three months’ worth of imports.

Last week, Egypt finalised a $3 billion load deal with the World Bank, of which it expects to receive the first $1billion tranche in December.

The Cairo-based African export-import bank Afreximbank announced a proposal to arrange a facility of up to $1 billion to Egypt, underwriting $500 million of the amount for the country’s Central Bank to improve foreign currency liquidity.

Egypt also expects to receive a $500 million loan from the Côte d’Ivoire-based African Development Bank before the end of the year.

source: Reuters