Egypt Cuts Size of Dollar Sale With Reserves at 15-Year Low

Egypt sold $49.6 million at a currency auction today, about a third less than the last sale, after the nation’s foreign reserves dropped to a 15-year low.

The central bank sold the currency at a weighted average price of 6.702 Egyptian pounds compared with 6.692 pounds at an auction Feb. 4, according to its data on Bloomberg. Lenders received on average 24 percent of the amount they bid for, the data show. The pound fell 0.2 percent to a record 6.7119 per dollar as of 1:58 p.m. in Cairo.

The currency has weakened 7.8 percent since the central bank started a policy of auctioning dollars on Dec. 30, limiting the availability of the U.S. currency in an attempt to slow the depletion of reserves. The decline is the steepest since the pound’s devaluation in 2003, according to data compiled by Bloomberg. Egypt, which has sought International Monetary Fund aid for two years, saw its net international reserves drop by $1.4 billion last month to $13.6 billion, central bank data showed yesterday.

The drop in reserves “adds more urgency to the re-engaging and concluding of an IMF program in February,” Jean-Michel Saliba, London-based economist at BofA Merrill Lynch, said in an e-mailed report today. “The current foreign exchange management framework could continue to play for time though the gap between the official and parallel rates is likely to widen and previous delays to the IMF deal have called for caution.”


Prime Minister Hisham Qandil told reporters today the country will invite the IMF to Cairo in the next few days to conclude a $4.8 billion loan agreement. Egypt started the foreign-exchange auctions to limit banks’ access to dollars after reserves fell to a level it called “critical.” The central bank has sold $1.15 billion at the auctions, according to data compiled by Bloomberg.

The central bank issued regulations this week capping the interbank trading rate at 1 piaster over the weighted average at the most recent auction of the U.S. currency, compared with a previous spread of 0.5 percent.

The yield on the 5.75 percent dollar-denominated bonds due in April 2020 retreated one basis point, or 0.01 of a percentage point, to 6.69 percent. That’s near the highest level on a closing basis since June.

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