The Central Bank of Egypt (CBE) held a fifth exceptional auction on 14 May to sell $1.1bn of its foreign reserves in efforts to support the banking sector, the bank said on Wednesday.
Stemming from the CBE’s efforts to manage and monitor the foreign exchange market, the monetary authority stated that banks are required to apply with the amount of US dollars needed as per their clients’ import needs.
The decision came in order to meet traders’ needs, who usually begin importing their goods for Ramadan at this time of the year, said Ali Al-Hariry, deputy chairman of the foreign exchange companies’ division within the Federation of Egyptian Chambers of Commerce.
“It will notably affect the informal foreign exchange market,” Al-Hariry said, adding that the exceptional auction will lead to a slump in the US dollar’s value of foreign exchanges to approach the CBE’s.
According to Al-Hariry, the informal price of selling $1 was EGP 7.5 before the decision. Meanwhile, the CBE’s official price stands at EGP 7.083.
In January, the CBE sold $1.5bn in a similar exceptional auction, $1.3bn last September, $600m in April and $800m in May 2013.
Since December 2012, the Central Bank has been restricting access to US dollars by hosting dollar auctions up to three times a week. The move comes as an attempt to ration the supply of dollars and give priority to staple food imports due to the state’s dwindling supply of foreign reserves.
Egypt’s foreign reserves slumped after the January 2011 revolution, standing at $17.48bn at the end of April compared to $36bn on the eve of the revolution.