Dollars start running out for Egypt's currency bureaus

CAIRO Sun Feb 17, 2013 10:11pm IST

A man stands outside an exchange bureau in Cairo December 30, 2012. REUTERS/Asmaa Waguih

A man stands outside an exchange bureau in Cairo December 30, 2012.

Credit: Reuters/Asmaa Waguih

CAIRO (Reuters) - Egypt's currency bureaus are being overwhelmed by demand for dollars amid a supply shortage fuelled by political crisis, the head of the foreign exchange department at the Chambers of Commerce said.

Mohamed el-Abyad said foreign exchange offices can only supply 20 percent of the dollars for which they receive orders.

"With the dollar shortage there is a semi-halting of our operations," he told Reuters in an interview.

More than two years of political instability following the overthrow of President Hosni Mubarak in 2011 has triggered a flight into dollars and disrupted foreign investments.

That has caused a devaluation of the local pound, which has dropped over 8 percent against the dollar in the past two months, and drained the country's foreign reserves.

The currency crisis has also driven some dealers into the streets in search of people with dollars to sell, spawning a new black market.

In an attempt to control the rate of the pound's decline, Egypt's central bank introduced a regular dollar auctions in December. Since then it has cut the amount of dollars it offers, to $40 million in its latest auction last week from an initial $75 million.

Abyad said the central bank's decrease in the amount of dollars offered is "due to the decline in their supply of dollars and not because the market does not need it."

Egypt's foreign reserves fell to $13.6 billion at the end of January - below the key $15 billion level needed to cover three months of imports. They stood at $36 billion on the eve of the uprising against Mubarak.

"The outflow of foreign investment and the flight of capital in fear of the situation in the country is what created the dollar crisis," Abyad added.

Egypt is negotiating a $4.8 billion International Monetary Fund loan but talks have stalled pending a revision of the country's economic reform program.

Prime Minister Hisham Kandil said last week the government had finished revising its program, and hoped the IMF team would return this month to resume loan talks.

The chief IMF spokesman said on Thursday he was unaware of the Fund receiving the revised program.

"(...There are no) clear or specific outlines of where we are going with the Egyptian economy," Abyad said.

(Reporting by Nadia El-Gowly and Ehab Farouk; Editing by John Stonestreet)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

India-China Ties

REUTERS SHOWCASE

Scotland Referendum

Scotland Referendum

Scots vote in record numbers, await independence verdict.  Full Article 

India-US Diplomacy

India-US Diplomacy

Obama to nominate Indian-American Richard Verma as India ambassador - congressional source.  Full Article 

GMR in Nepal

GMR in Nepal

Nepal clears India’s GMR plan for $1.4 bln hydroelectric plant.  Full Article 

LIC on Markets

LIC on Markets

LIC chairman bullish on Indian markets  Full Article 

India Rains

India Rains

Monsoon rains weaken as late retreat looms.  Full Article 

Ellison Quits

Ellison Quits

Oracle's Ellison steps aside, co-CEOs Catz and Hurd take over.  Full Article 

Infosys-Huawei

Infosys-Huawei

Infosys partners with China's Huawei for cloud-based services  Full Article 

Gold Outlook

Gold Outlook

Gold imports seen up, premiums likely to double on festive buying  Full Article 

Trade Dispute

Trade Dispute

U.S. to press India on trade row during Modi's Washington visit  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage