CAIRO: The Egyptian pound weakened yesterday at an exceptional central bank sale of $1.1bn aimed at supplying dollars to importers of essential foodstuffs, allowing it to hit a new all-time low in the official market.
In a country where subsidised food is considered essential to averting social unrest, tight finances have been hindering payments for food commodities, traders have said. Egypt is the world’s biggest wheat buyer.
The central bank announced a cut-off price of 7.0950 pounds to the dollar at the auction, weaker than at the last central bank foreign exchange sale held on Monday, when the cut-off price was 7.0451. In the interbank market, the dollar changed hands for as much as 7.1049 pounds, the lowest according to data going back to the 1990s.
The rates banks are allowed to trade dollars at are determined by the results of the central bank sales, giving the bank effective control over official exchange rates. The central bank sold the entire amount it had offered.
Egypt has been suffering from a sustained dollar shortage as political turmoil following the 2011 uprising. Egypt’s foreign reserves rose to $17.49bn in April from $17.41bn in March, but are still markedly lower than the $36bn seen before the 2011 revolt.
Banks and traders say some of the funding problems which surfaced early last year have re-emerged. “This auction is intended to cover and clear all pending food backlogs to secure availability of staple food commodities over the coming period,” the central bank said in a statement. The auction is significantly larger than the $40m foreign currency sale Egypt holds three times a week. Reuters
