The Central Bank of Egypt (CBE) sold $1.5bn to banks in an exceptional auction on Wednesday to cover a portion of the temporary credit facilities granted by banks to their importing clients in foreign currencies.
The CBE requested banks on Tuesday morning to list all temporary credit facilities granted to their importer clients in foreign currencies, with deposits in local currency as collateral.
The CBE covered part of those facilities through the exceptional auction, in which the price of the US dollar was set at EGP 8.78, seven piasters lower than the price set on Monday’s exceptional auction.
The dollar value is set at banks at EGP 8.88. This value is set until Thursday’s CBE auction, in which the CBE can readjust the price again.
This brings the total sum provided by the CBE to cover those facilities to approximately $3.1bn, in the period from 11 November 2015 until Wednesday 16 March.
The CBE had covered a large part of these facilities through two previous auctions held for the same purpose, one worth $1bn in November 2015 and $600m in December 2015 respectively.
According to a previous agreement between the CBE and banks, banks are obliged to deposit the amounts obtained in auctions at CBE at the end of the same day they are received. This applies only to auctions that are held to cover only the temporary credit facilities.
Banks deposited the US dollar liquidity they obtained on Wednesday at the CBE for a period of one year, at a yield of 1.23%.
According to a prominent banker who spoke to Daily News Egypt, with this measure the CBE aims to alleviate the burden of importers as much as possible. The move also aims to help importers restore their activities, pay off their debts, and ease demand for US dollar.
In January 2013, the CBE issued a decision allowing banks to grant their importer clients temporary facilities in foreign currency, until foreign currency liquidity is restored. However, the dollar shortage prevented importers from paying those debts, prompting the CBE to intervene to resolve the problem.
Following the exception auctions on Monday and Wednesday, transactions in the informal market have come to an almost complete halt, causing the value of the dollar to decline since Monday.
The US dollar was traded in the informal market on Wednesday at a bid price of EGP 9 and 9.10 and an asking price of EGP 9.20 and 9.30.