Egypt’s pound stable in official channels, weakens on black market

CAIRO: The Egyptian pound kept steady at 7.53 per U.S. dollar Tuesday following a regular Central Bank foreign exchange auction Monday, but the local currency weakened on the black market.

The pound dropped against the dollar on the parallel market as it was changing hands at 7.65 EGP per dollar, a very close price to 7.63 per dollar at the official market, a dealer told The Cairo Post.

After 10 consecutive depreciations starting Jan. 18 to wipe out the black market, the Central Bank of Egypt (CBE) allowed the pound to hold steady against the dollar over the past few weeks.

“The bank offered $40 million and sold $38.2 million at a cutoff price of 7.53 EGP per dollar,” the CBE posted on its website Monday. It remains the lowest level Egypt’s central bank had allowed the local currency to reach since auctions began in December 2012.

In comments to The Cairo Post, banking expert Khaled Ateya said the black currency market witnessed a sharp decline in volumes due to the central bank’s decision to depreciate the pound in the official market and the ceiling imposed on dollar-denominated deposits in banks.

A $10,000 daily cap for cash deposits in hard currency for both individuals and companies, with a maximum of $50,000 monthly was part of CBE’s procedures against the black market in February.

“This ceiling on deposits has deprived those exchanging their dollars outside the official market from a place to deposit their cash,” said Ateya.

He continued: “Deposits from the Gulf states pledged at the recent economic summit would save cash liquidity in dollars which would enable the central bank to extend its clampdown on the parallel market in the short-term.”

The three-day Egypt Economic Development Conference (EEDC) held in Sharm el-Sheikh March 13-15, resulted in anticipated investments of $72.5 billion, Prime Minister Ibrahim Mahlab announced at the conclusion of the conference.

Saudi Arabia, the UAE, Kuwait and Oman, pledged a total of $12.5 billion to Egypt at the conference, half of which to be deposited at the CBE.

Around $6.5 billion Gulf deposits will be transferred to the central bank “in the coming days,” according to CBE’s governor Hisham Ramez.“The deposits will help bolster Egypt’s foreign currency reserves and ease pressure on its local currency,” MENA quoted Ramez last week.

Egypt’s foreign reserves are expected to surge to roughly $22 billion after receiving these deposits, compared to $15.45 billion at February-end, a top government official told Youm7 late Monday.

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