Egypt to approach IMF in days as free currency trade debuts

Egypt will ask the International Monetary Fund’s executive board within a day or two to consider its $12 billion loan request, Finance Minister Amr El-Garhy said, after the central bank freed the pound’s exchange rate to help spur investments and ease a dollar crunch.

The push to finalize the loan comes as Egyptian banks on Sunday began freely trading foreign exchange on the interbank market for the first time. The weakest rate quoted for the currency was 16.55 per dollar, compared with Commercial International Bank’s 16 to a dollar late on Nov. 3, hours after the pound was floated.

A total of $15.8 million changed hands -- a level which was “low but expected given that banks have been starved of foreign currency for such a long time,” according to Reham ElDesoki, senior economist with Dubai-based Arqaam Capital. Volumes “should go up with time,” she said.

“The central bank will probably wait and see how the system works in terms of self financing” before deciding whether to inject liquidity into the market.
Attention now turns to the IMF, which had tied the loan’s final approval to Egypt liberalizing its exchange rate and cutting energy subsidies, both carried out last week. Egypt sees the accord as key to shoring up investor confidence in an economy that’s struggled since the 2011 ouster of then-President Hosni Mubarak. Economists have said the measures could stoke inflation that for months has been at its highest level this decade.
Egypt’s benchmark EGX 30 index of stocks jumped 4.7 percent as of 10:46 a.m. in Cairo, extending its rally for an eighth day -- the longest since March. The pound’s 12-month non-deliverable forwards plunged 11 percent to a record low 18.7 per dollar.