Egypt's Central Bank holds 'exceptional' auction of $500M to cover basic commodities

Published March 7th, 2016 - 09:00 GMT
Egypt's foreign reserves have dropped by more than fifty percent since January 2011. (File photo)
Egypt's foreign reserves have dropped by more than fifty percent since January 2011. (File photo)

The Central Bank of Egypt (CBE) is pumping $500 million to banks in an exceptional auction on Sunday to cover the imports of basic commodities, two banking sources said.

This exceptional auction will be held on Sunday afternoon instead of the regular foreign exchange auction that the CBE holds every Sunday, Tuesday and Thursday, the sources added. Typically the bank offers $40 million in each foreign exchange auction.

The Egyptian pound slipped further against the dollar on the black market, where it is changing hands at EGP 9.73 to the dollar. It jumped from 9.5 on Thursday, according to Reuters.

Yet, at state auctions, the pound is still trading at EGP 7.73 to the dollar.

Egypt is facing a heavy shortage of hard currency with both investment and tourism, once main sources of foreign currency, slowing down.     

Although the CBE has taken several measures last year to put an end to trading currency on the black market, a recent decision to raise the cap on the deposits exporting companies can make has actually revived the parallel market.

Years of political turmoil led to a drop by more than a half of Egypt's foreign reserves in the years following the popular uprising in January 2011, which ended the rule of President Hosni Mubarak. The instability that ensued has driven tourists and investors away.  

Egypt's foreign reserves inched up at the end of February by 56 million dollars reaching 16.533 billion, still less than half of the foreign reserves Egypt had before Mubarak's removal when they were almost $36 billion.   

The Egyptian state has been scrambling lately to collect money, signing loan agreements with the World Bank and the African Development Bank (AfDB) in December.


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