Wednesday, November 12, 2014

Egypt's currency black market to disappear within a year: CBE governor

CBE governor upbeat about foreign currency reserves, unconcerned about effect of returning billions of dollars of Qatari deposits

Hisham Ramez

Central Bank of Egypt Governor Hisham Ramez

Egypt's central bank (CBE) plans to eliminate the currency black market in less than a year, Hisham Ramez, the bank's governor, said on Tuesday.

The Egyptian pound saw a widening gap between its exchange rates on the official market and the black market after the uprising which toppled president Hosni Mubarak in 2011 and the following years of political and economic turmoil.

"My internal target is six months – but let me tell you, one year and this will disappear, this kind of grey market, because it is an issue of confidence" which shows signs of being restored, Ramez told a US business mission to Egypt gathered in Cairo.

Since President Abdel-Fattah El-Sisi's election in June of this year, the government has taken several economic reform measures to return investor confidence in the economy, several of which have been hailed by international institutions and credit rating agencies.

Ramez stressed that foreign currency was available in Egypt, albeit outside the formal banking sector, recalling that $1.5 billion was sold to the banks when the CBE issued Egyptian pound-denominated investment certificates to finance an extension of the Suez Canal in September.

"We don't have a problem of foreign currency availability as a country: the problem is that it is not in the right channel," he added, without specifying how the CBE would tackle the issue.

The official rate was stable at LE7.1401 per dollar, according to the latest auction by the CBE held on Monday, while the rate on the unofficial market weakened to LE7.56 per dollar from LE7.5 a few days earlier.

Egypt's net international reserves stood at $16.9 billion at the end of October.

The CBE governor was also unconcerned about the effect of Egypt returning billions in deposits to Qatar, which he described as "hot money" on its net international reserves position.

The bank is preparing to return $2.5 billion of matured deposits to Qatar by the end of November, bringing to $6 billion the sum it has returned to the country in several instalments since last year.

The Gulf monarchy had deposited a total of $6.5 billion in Egypt's central bank during Islamist president Mohamed Morsi's year in office, but relations between the two countries have soured since Morsi's ouster in July 2013.

"We are working very hard to cover up [the void left by] this money," said Ramez, assuring that the reserves will exceed their current level "by far" in the "next three to four months" without specifying how this will be achieved.

Last month, anonymous sources told several Egypt media outlets that Saudi Arabia and the United Arab Emirates would deposit $5 billion (LE35 billion) in the CBE before the end of the month, but the reports have not been officially confirmed.

Saudi Arabia, the UAE and Kuwait stepped in to support Egypt following Morsi's fall, showering the country with $10.6 billion in aid and grants, most of which came in the form of petroleum products, with cash received amounting to almost $3 billion.