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Business Recorder: China signs three-year $2.62 billion bilateral currency swap with Egypt

A move that importers and economists said would facilitate trade and improve foreign currency liquidity in cash-strapped Egypt.
07.12.16 | Interesting article at Business Recorder

China and Egypt on Tuesday concluded an 18 billion yuan ($2.62 billion) three-year bilateral currency swap, a move that importers and economists said would facilitate trade and improve foreign currency liquidity in cash-strapped Egypt. Egypt's central bank, which signed the deal with the People's Bank of China, said the arrangement could be extended by mutual consent. "This bilateral currency swap is a mutually beneficial arrangement between both countries," it said in a statement.

The People's Bank of China said the move was aimed at promoting trade and investment and maintaining financial stability in both countries. China has carried out swaps with more than 30 central banks around the world to increase the use of the yuan as a global reserve currency and to stimulate bilateral trade. The yuan is traded onshore against 16 major currencies.

Neither bank gave details on how the Egyptian currency swap would work but economists and businesspeople expect it to have a positive impact on Egypt's foreign reserve position. "The position of the central bank is definitely increasing, with more firepower denominated in foreign currency to stabilise the Egyptian pound when needed. So this is definitely something positive," said Hany Farahat, senior economist at Cairo-based CI Capital.

Egypt has struggled to revive its economy since a popular uprising in 2011 drove away tourists and foreign investors, major sources of foreign currency. Reserves tumbled from $36 billion in 2011 to around $16.56 billion at the end of last August. But Egypt has since pressed ahead with a reform programme that has seen it abandon its currency peg, cut subsidies and introduce a value-added tax.