CAIRO: The Egyptian pound slid to a new record low yesterday, only a day after Qatar threw Cairo an economic lifeline by sending $ 2.5 billion in aid to help it tackle a currency crisis.
Demand for dollars remained strong as businesses and ordinary Egyptians continued selling the local currency, fearing their funds would lose even more value after weeks of political strife and pressure on Egypt’s foreign reserves, bankers told Reuters.
Economists say the Qatari money might help the central bank, which has been auctioning dollars daily since the end of last year, to prevent a disorderly fall in the currency.
They say the pound remains overvalued after two years of turmoil that has chased away foreign investors and tourists, so the authorities cannot halt the slide as they struggle to meet demand for dollars, including for imports of food and fuel.
“Qatari support does help alleviate immediate concerns, but is only a stopgap measure, particularly if the central bank keeps auctioning $50-75 million in almost daily auctions, while also providing foreign exchange for wheat and refined oil imports,” Raza Agha, an economist with VTB Capital, told Reuters.
The pound weakened half a percent on the interbank market to around 6.51 to the dollar, near the bottom of the central bank’s permitted trading band. Banks grabbed almost all the $ 50 million dollars on offer at Wednesday’s auction.
The central bank has allowed the pound to slide by about 0.5 percent a day against the dollar since it introduced a new currency regime on Dec. 30, saying Egypt’s foreign reserves had fallen to a critical minimum.