Egypt's central bank plans to inject dollar liquidity into the market this month and is planning an exceptional foreign exchange auction, the presidency said on Wednesday, the latest move to end a long-running currency crisis.
Issued after a meeting between President Abdel Fattah al-Sisi and new central bank governor Tarek Amer, the surprise statement said Egypt's foreign reserves were stable and would improve in the coming period, reassuring investors worried that the country could run out of hard currency.
The statement did not say where Egypt would source the dollars for its planned forex injections or how it expected to rebuild its foreign currency reserves.
Foreign currency reserves have dropped to about $16.4 billion in October from $36 billion before the 2011 revolt that ended Hosni Mubarak's 30-year rule and scared off tourists and foreign investors — key sources of foreign exchange earnings.
"As an importing country that needs dollars this will have a positive effect on the markets and the banks. The only issue is that we don't know where he will source these dollars from. There is no transparency on that. Will there be new resources coming in?" one banker asked.
Since Amer's appointment in late October the central bank has taken measures to supply banks with badly needed dollars as the country struggles with a foreign currency shortage that has stifled imports and dampened economic output.
Last month the central bank supplied $1 billion to banks to cover 25 percent of dollar overdrafts they had opened for companies during the crisis, just after state banks had supplied $1.8 billion to clear a backlog of imports.
Amer, who officially took up his post last Friday, made his first major move as governor on Tuesday by repaying foreign portfolio investors $547.2 million, clearing the entire backlog.
Egypt is expected to receive $3 billion in loans from the World Bank over three years but it is not clear if there are additional sources of foreign currency to cover Egypt's dollar injections.
