Central Bank of Egypt sold a record $600 million to local lenders on today to finance imports of basic commodities as the cash strapped Government has been able to secure a $3 billion support pledge from Qatar. All Dollars that was offered at this exceptional auction was sold by regulator, with weighted average being of 6.872 Egyptian Pounds each. This is 0.2% less, if the last currency sale conducted on 11th April is compared. Incidentally, Egyptian Pound has weakened to a record low figure since December, when auctions started for first time.
Currently, Egypt has sort of limited access to USD to stem a drop in the foreign reserves. The country is currently struggling with power cuts, fuel shortages and the economic slowdown that has compounded the political crisis that the President, Mohamed Mursi is facing. The amount offered during the auction of today is 15 times more, if compared with the amount that the Central Bank generally makes available during the regular currency sales.
According to the Chief Economist of CI Capital Holding, Mona Mansour, people are kind of queuing in the line for getting access to the hard currency. Mona added that the importing rationing has kind of eased now as many got funds from outside Egypt. She referred to the Central Bank, while making the comments.
As far as a statement made on the official website of the Egyptian Central Bank, its decision to offer the funds on today was mainly to fulfill the existing requests at the banks to finance imports of the strategic goods. Numerous commodities were listed such as poultry, fish, tea, medicines, production machinery, meat etc. The purchases done by the state run General Authority for Supply commodities were not included in the list, as mentioned in the official statement. Incidentally, Egypt is the largest buyer of wheat in the world and it also relies on the imports for some of the energy requirements of the country.
Since the 2011 revolt which played a big role in toppling the President Hosni Mubarak, the foreign reserves of Egypt have plunged by 60% and in March, it was at $13.4 billion. The reserves are just enough to cover less than the imports of the last 3 months. To curtail drop, Central Bank has limited access of local lenders to Dollars at auctions since 30th December.