CBE head promises more dollar liquidity, says reserves are stable

The Central Bank of Egypt plans to increase dollar liquidity in the market and will introduce a special auction to meet the needs of importers, according to a statement from the office of the presidency.

The statement came after a Wednesday meeting between President Abdel Fattah al-Sisi and Egypt’s new Central Bank Governor Tarek Amer. According to presidential spokesperson Alaa Yousef, Amer also said Egypt’s foreign reserve position is “reassuring” and “stable,” and will improve in the coming months.

Amer reportedly said he plans to increase and activate the tools available to control the local market, although the exact mechanisms were not specified. The announcement also did not clarify where additional injections of dollars might come from.

In the meeting, Amer also defended the bank’s decision to allocate more than half a billion dollars to foreign stock and bond investors on Tuesday.

The CBE announced Tuesday that it had cleared the entire US$547 million backlog owed to foreigners who invested in the stock market or into government bonds and bills, before an alternative repatriation mechanism was introduced in 2013.

On the same day, some local banks were reportedly left short on their usual allocation of dollars from the CBE’s regular currency auction. The decision came at a time when many local companies complain they are unable to source the hard currency they need to pay import bills and keep their businesses running.

At his meeting with Sisi, Amer defending the decision, saying it will increase foreign investors confidence and ultimately contribute to an increase in market liquidity.

The stock market’s performance Wednesday appears to back up Amer’s assertions. After a steep tumble on Monday, the benchmark EGX30 index was up by 1.1 percent on Tuesday, accelerating to a 3.5 percent surge on Wednesday. Despite the overall rise on the market, however, non-Arab investors were net sellers on Wednesday.

Egypt’s foreign reserves half nearly halved from $30 billion on the eve of the 2011 revolution to $16.4 billion at the end of October. Amer’s predecessor, Hesham Ramez, faced widespread criticism for propping up the pound’s dollar exchange rate while Egypt’s dollar reserves dwindled.