By Hossam Monir
The Central Bank of Egypt (CBE) is continuing to pump the dollar liquidity in banks to help them cover their customers’ foreign currency demands.
A total of $98.6m was granted to the banks through an auction that the CBE held on Sunday. This bid was set to be launched with $40m, but the CBE raised the amount to $100m, of which $98.6m the banks obtained due to the allocation system. The dollars were sold at 753.01 Egyptian piasters per $1, according to the CBE.
The CBE’s move came on the same day it disclosed a decline in its balances of foreign currency by about $965m at the end of last May, registering $19.56bn compared to $20.525bn by the end of last April.
“The step of giving the banks $98.6m in that auction, instead of about $40m the CBE was pumping in the market, provides more foreign currency in the market. Consequently, it helps banks cover the dollar demands of their customers,” said Haitham Abdel-Fattah, Head of the Treasury Sector in the Industrial Development and Workers Bank of Egypt.
Abdel-Fattah added that the CBE did not direct this liquidity to import specific commodities, but to cover any demands for basic goods, production inputs, and the rest of the goods that it previously determined within the system of priorities.
The move is a step in the right direction towards more stability in the exchange market, he added.
“The last dollar auctions of the CBE had a big role in easing the crisis of the pending demands in banks; we can say that about 70% of these demands were covered,” said Head of the Treasury Sector in the Housing and Development Bank, Ahmed El-Kholy.
El-Kholy added that the CBE collects all the data of the dependent demands in the banks daily and in detail, after it was a weekly process, and works on covering them due to the system of priorities that was settled earlier to provide foreign currency.
Statistics gathered by Daily News Egypt indicated that the CBE pumped around $4.718bn in the market since the beginning of the year until this Sunday, 7 June, around $3.217bn of which were pumped through the auctions for selling the American currency, launched four times a week. Around $1.501bn came through the dollar interbank system that the CBE reused after it was halted for more than two years.
The CBE used the dollar interbank system for the first time this year on 1 March, were it proposed $420m. The amount was directed to fund importing food commodities, raw materials and medications. After that, on 5 April, the CBE proposed an additional $281m for the purpose of covering the demands of basic food commodities, in addition to $500m pumped on 4 May to cover the demands of importing food commodities in the banks. Finally, the CBE pumped $300m on 7 May to fund importing raw materials, production inputs, and spare parts.