Egypt to hold $600 million auction to cover strategic imports

CAIRO - Reuters

A woman walks past the Egyptian Exchange in Cairo April 1, 2013. REUTERS Photo

Egypt's central bank will hold an exceptional foreign exchange auction for $600 million today to cover strategic imports such as wheat, meat and cooking oil, it said in a statement.
 
The auction is 15 times the size of the three $40 million currency auctions the cash-strapped central bank has been holding weekly in recent months.
 
The most populous Arab nation is grappling with an economic crisis caused by more than two years of political instability. Egypt's foreign currency reserves are at critically low levels and the government is struggling with an unaffordable deficit.
 
Shortages of imported fuel are disrupting transport and causing power cuts in the country of 84 million. The situation is expected to worsen as summer approaches and Egyptians switch on their air conditioning.
 
The world's biggest importer of wheat, Egypt has cut back on international purchases this year in the hope of a bumper local harvest.
 
Sunday's auction was held for banks with clients importing staple commodities such as wheat, cooking oil, tea, meat, fish, beans, butter, corn and baby milk, components for drugs and vaccines as well as spare parts, the statement said.
 
"Banks are required to apply with the amounts of their client's outstanding import needs," it said.
 
The central bank auction coincides with the start of the wheat harvest for which farmers urgently need fuel supplies to run harvesters and transport the crop to storage centres.
 
The results of future special auctions would be announced on the central bank website, it said, without saying when. It extended the bidding time for Sunday's auction until 1230 GMT.
 
In a boost to Egypt's finances, Qatar this week agreed to buy $3 billion in government bonds and to supply natural gas in the summer when it is needed. Libya also agreed to deposit $2 billion with the Egyptian central bank. The government is also in talks with the International Monetary Fund on a $4.8 billion loan deal that would unlock billions more in international support.