By: Lamia Nabil
The International Finance Corporation (IFC) is planning to conduct currency swaps in Egypt, according to Reuters.
“Just like we did in other places globally, we’ll come up with an instrument to swap dollars for local currency in Egypt,” said Jin-Yong Cai, the IFC’s CEO and executive vice president, as reported by Reuters. “We need local currency and some other private investors need dollars. It’s in a way a hedging for investments.”
Cai, however, did not mention the timeframe nor the mechanism to achieve the plan.
Explaining the benefits of the plan, he pointed out that some firms in Egypt are currently struggling to find US Dollars for imports, debt payments, and “other necessary activities”, especially after two years of turmoil and unrest and the deterioration of the country’s foreign currency reserves.
Cai also said that the private sector is key to unlocking what he termed as “Egypt’s long-term economic potential,” according to an IFC statement released during the Cai’s first official visit to Egypt last week.
During the visit Cai met with representatives of the Egyptian Government, including Prime Minister Hesham Qandil, and members of the businesses community. Cai discussed ways to boost investor confidence, support small businesses, and spur the development of infrastructure projects.
“It is no secret that many countries in the region, like Egypt, have struggled during the last two years,” he said in the statement. “One of the keys to restoring the region’s economic lustre is supporting the private sector, which has the potential to drive growth and create the jobs people here so desperately need.”
Over the past two years IFC has committed $723m to 11 projects. It has also been providing advisory services to strengthen business regulations, increase access to finance, support the development of smaller enterprises, and assist in the creation of public-private partnerships in infrastructure.
Cai also revealed that the IFC will consider the possibility of issuing bonds in local currency in Middle Eastern countries in order to fund their investments there.
“In the Middle East the challenge is not the lack of capital but the access to dollars by local banks,” he explained.
The IFC was established in 1956 as the private sector arm of the World Bank Group to advance development and reduce poverty in emerging economies by investing in strictly for-profit and commercial projects.
IFC investments in FY 2012 reached $20bn.