Egypt Reduces Dollar Sales to Stem Pound Decline Before IMF
Egypt’s central bank will reduce the number of dollar auctions this week to three as it seeks to slow the pace of the pound’s depreciation before loan talks with the International Monetary Fund resume later this month.
The regulator sold $74.8 million of the U.S. currency at today’s sale at a cut-off price of 6.5299, according to an announcement on Bloomberg. Banks placing bids at that price received 20.2 percent of their demands, the data show. The pound weakened to 6.5626 a dollar as of 5:15 p.m. in Cairo, extending to 5.7 percent its slide since the central bank started the auctions Dec. 30, data compiled by Bloomberg show.
Under the new system, the central bank limits the amount of dollars that each lender can purchase to conserve foreign reserves. The government is seeking a $4.8 billion loan from the IMF to stem the drop in net international reserves after they plunged almost 60 percent in the past two years.
Reducing the number of sales “aims to slow the speed of depreciation,” Sherif Othman, Cairo-based head of treasury at Arab Banking Corp., said by phone. “We are waiting for an IMF deal at the end of the month, and we don’t want to see the pound weakening to below 7” pounds a dollar, he said.
Egypt’s net international reserves were little changed in December at $15 billion even after Qatar doubled a deposit at the central bank to $4 billion. That transfer took place last month, Nidal Assr, central bank’s sub-governor, said Jan. 10.
The government asked the IMF to delay the agreement last month after President Mohamed Mursi suspended tax increases linked to an IMF-backed economic plan amid escalating political tensions. A team from the Washington-based fund is due to arrive in Egypt in two to three weeks, presidential spokesman Yasser Ali said on Jan. 8.
“We are going to be back on track very soon,” Prime Minister Hisham Qandil said today at a conference in Cairo. Egypt invited the IMF mission “to again realign the program so we can move forward with our national reform program.”
Protecting what’s left of foreign reserves will be one of the challenges facing Hisham Ramez, who will take over as central bank governor from Farouk El-Okdah on Feb. 3. Ramez had resigned as deputy governor after the 2011 revolt that toppled Hosni Mubarak to become managing director of Commercial International Bank SAE Egypt, the country’s biggest publicly traded lender.
The government has said the IMF agreement is crucial to restore foreign investments, which will help boost reserves and lower borrowing costs.
The Finance Ministry raised 1 billion Egyptian pounds ($153 million) in three-month treasury bills at an average yield of 13.44 percent, 14 basis points, or 0.14 percentage point, lower than the previous sale of similar-maturity notes, according to central bank data on Bloomberg. The yield on nine-month securities fell three basis points to 14.40 percent.
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