Egyptian banks have accumulated requests for hundreds of millions of dollars with the Central Bank which has not released any dollars into the market in over a month.
The Central Bank in January pledged to stabilise exchange rates and dollar supply by making strategic injections of dollars into the banking sector. Bankers played down the impact the delays were having on their business.
“We don't know why the Central Bank has made no dollar sales in the last month, but we are managing without them,” said one banker, who declined to be named.
“We would like dollars [from the Central Bank]… but the Central Bank has its reasons and we have to trust it to regulate the market,” said another banker.
Egyptian business daily al-Alam al-Youm said on Thursday that bank dollar requests with the Central Bank amounted to some $630 million and it listed eight of the highest requests.
Reuters was able to confirm the amounts in question with three of the banks. The others could not be reached for comment.
Central Bank officials were not immediately available for comment on the size of the requests or the reasons behind recent delays in dollar sales.
Although there is a shortage of dollars in the market, several bankers said their banks were managing to meet many of their customers' requirements by collecting dollars from the market place and using other instruments. Central Bank regulations permit banks to use dollar instruments such as travellers cheques', bank deposits and loans.
“We sometimes resort to this method (of alternative instruments) when we need to… but it can be risky in the event of a devaluation,” one banker said.
Egypt introduced a new foreign exchange system in January to check the decline of the pound against the dollar after it had abandoned a nine-year currency peg in May and allowed the pound to depreciate from 3.40 to the dollar to nearly four pounds.
The pound is now valued officially by a “managed peg” system which allows the pound to trade one percent above or below a central rate, last week adjusted to 3.86 from an initial 3.85.
But black market rates have recently risen to around 4.10 pounds for people wishing to buy dollars, market sources said, as foreign exchange bureaux and banks have been unable to provide customers with large amounts of foreign currency at the official rates of exchange.
This article was first published by Reuters on 7 June 2001.