Egypt Reduces Number of Dollar Auctions

The Central Bank of Egypt has decided to reduce the total number of Dollar auctions to be held this week to 3. This is done with an expectation that depreciation of the Egyptian Pound slows down. At later part of January, the policy makers of this African country are going to start discussion on the loan terms with officials of International Monetary Fund.

The Central Bank started Dollar auctions on 30th December, last year and since then the Egyptian Pound, major currency of Egypt has plummeted by more than 5.7%. The Egyptian Pound is currently priced at 6.5626 per USD. Today’s sale was done through a cut-off price of 6.5299 Egyptian Pounds per USD and a total of $74.8 million USD was sold. According to the statistics, the banks which placed bids at the cut off price got a return of 2.2% of their demands.

As part of the new system, the Central Bank of Egypt can limit the total amount of USD that any lender can purchase in an attempt to conserve the foreign reserves. Incidentally, the Egyptian Government has asked for a total loan worth $4.8 billion from the International Monetary Fund so that the net international reserves can be stemmed. The international reserves plummeted by 60% in the last 2 years.

According to the Head of the Treasury Department of Arab Banking Corp., Sherif Othman, this decision of Central Bank is aimed to slow down the speed of Egyptian Pound’s depreciation. He added that the policy makers are looking forward to a possible agreement on the loan from International Monetary Fund. If this happens, the Egyptian Pound will not go down below 7 per USD.

The net international reserve of Egypt in December was at $15 billion, despite the fact that Qatar doubled the total deposit at the Central Bank. On 10th January, this transfer worth $4 billion was held, as confirmed by the Sub-Governor of Central Bank, Nidal Assr.

President of Egypt, Mohamed Mursi decided to suspend the tax increases linked to the economic plan backed by The International Monetary Fund. Within the next few weeks, a team from the Washington based fund is going to come in Egypt, as confirmed by Yasser Ali, the spokesman of President. Hisham Qandil, the Prime Minister of Egypt, stated that he expects that the country will be back on track in 2013.