Reuters
CAIRO: Egypt has diversified its foreign exchange reserves over the past 18 months by cutting its holding of U.S. dollars to around 57 percent of the total from more than 90 percent, central bank Governor Farouk El-Okdah said on Monday. The weighting of reserve currencies now matched the country s debts and trading pattern, he told a news conference. More than 90 percent of reserves were in dollars. I now declare that this policy has been changed 1-1/2 years ago … Reserves are now about 57 percent in dollars, Okdah said. Some 43 percent of Egypt s debt is denominated in currencies other than the dollars such as euros, yen and sterling, the governor added. Egypt s net foreign reserves rose to $26.20 billion at the end of February, from $26.08 billion at the end of January, the central bank said. Reserves at the end of February 2006 stood at $22.37 billion. Okdah said the central bank has been buying foreign currency from the market to increase its reserves because the market is very liquid . He said it was up to market forces to determine the exchange rate of the Egyptian pound. Finance Minister Youssef Boutros-Ghali said last week that the dollar would be worth less than five Egyptian pounds if the market was left alone without intervention. The current rate is about 5.7. The central bank governor predicted inflation in Egypt would start falling in May or June 2007 after the effects of fuel price increases and bird flu wear off. The government raised fuel prices by up to 30 percent in July last year. An outbreak of bird flu in February 2006 has helped drive up food prices, economists say. Monetary policy does not target the inflation rate that is a result of (price) shocks…Monetary policy is not flip-flop, rising with eggs and falling with chicken, Okdah said. Officials had predicted inflation would start to fall early this year but the latest wholesale price index, available on Monday, showed an increase of 15.9 percent in the year to the end of January. The latest figure for consumer inflation is 12.4 percent, for the year to January. He said foreign direct investment in Egypt in the July-December 2006 period was $7.2 billion, compared with $3.3 billion in the same period of 2005 and more than the total for the whole of the 2005/6 financial year, which ended last June. This is a vote of confidence in the economy, he said. Of the total foreign investments, Okdah said $2.1 billion were in the energy sector, $3.5 billion were to set up new companies and $2.6 billion from privatization including the sale of 80 percent of Bank of Alexandria for around $1.6 billion. The governor said capital outflows were about $1 billion during the first half of the current fiscal year.
