Egypt’s central bank said it’s allowing banks to temporarily provide clients with facilities in foreign currency for import operations.
The central bank will permit banks to refinance importing operations for clients by providing “temporary facilities in foreign currency” based on the banks’ credit evaluation, according to a statement dated Jan. 14 and posted on the central bank’s website today. The previous rules allowed such financing only to borrowers who could show that they had the foreign-currency resources to repay them.
“They are relaxing the rules for trade financing by allowing banks to lend to clients who don’t possess the foreign-exchange resources to get around the shortage of FX liquidity, so that business activities are not interrupted,” said Mohamed Abu Basha, an economist at Cairo-based investment bank EFG-Hermes Holding SAE. “This might help ease the situation a bit, but the problem will still remain that there’s a growing gap between the demand and supply of foreign exchange in the market.”
Egypt’s economy has been struggling to recover since the uprising that ousted Hosni Mubarak in 2011, as the political tensions that followed hurt tourism and foreign investment. The bank introduced foreign-exchange auctions in December to preserve its plunging foreign reserves by limiting the amount banks could buy.
The pound was little changed at 6.6199 per dollar at the close in Cairo. The currency has depreciated about 6.5 percent since the auctions started, more than twice the amount it fell in the previous year, according to data compiled by Bloomberg.