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Egypt’s bank to offer IPO to end currency crisis

Egypt will sell $120 million on Tuesday after PM Ismail told parliament that situation is ‘tough’ in the country

Published: Updated:

Egypt will sell $120 million on Tuesday in its regular weekly dollar auction, central bank data showed after the country’s premier pledged to end currency crisis the day before.

Speculation has been mounting that the central bank would devalue its currency amid a rapidly weakening rate on the black market.

Bankers and economists have said a devaluation could come in an exceptional auction for a quantity of dollars greater than the usual $120 million sold weekly.

The rate for Tuesday’s auction has not yet been specified.

Egyptian Prime Minister Sherif Ismail told parliament on Monday the government was working with the central bank to bring an end to the discrepancy between the official and parallel market exchange rates for the Egyptian pound.

Ismail said that a previous currency adjustment, a reference to a 14 percent devaluation in March, had happened “without proper instruments” and brought about negative effects.

The Egyptian pound has been falling on the black market since the 2011 revolution drove away tourists and foreign investors, vital sources of hard currency in an economy that relies on imports of everything from food to luxury cars.

The central bank has been rationing dollars and imposing capital controls as it maintains an artificially strong pound at 8.8 per dollar but traders said on Monday the rate was 18-18.2 on the parallel market compared to 16.1 pounds last week.

“We appreciate the country’s situation. We are going through a very tough situation,” Ismail told members of parliament.

The pound has been tumbling almost daily on the black market since Saudi Arabia halted petroleum aid to Egypt this month, forcing it to spend $500 million for oil products on the spot market.

Egypt is waiting for IMF board approval of the three-year program. In return, Egypt must carry out economic reforms, including a devaluation of the pound and painful subsidy cuts.

Meanwhile, Egypt’s central bank has kept its currency stable at its weekly dollar auction, bankers said on Tuesday, holding the rate at 8.8 pounds per dollar.

(Withy Reuters)