CAIRO: Egypt’s central bank, seeking to reassure investors over Egypt’s exposure to the global financial crisis, said on Sunday its foreign currency reserves and the external positions of Egyptian banks were secure.
Central Bank Governor Farouk El-Okdah put the overseas positions of Egyptian banks at around $15 billion, while he said the central bank’s foreign reserves stood at around $35 billion.
Okdah, addressing a news conference alongside Egypt’s prime minister and investment minister, said the central bank had its foreign currency reserves primarily invested in sovereign debt instruments, such as US Treasury bills.
“Banks, thank God, are strong and in an excellent state, he said.
But Prime Minister Ahmed Nazif said Egypt could see an indirect impact from the crisis, with a global downturn potentially affecting Egypt’s tourism industry, Suez Canal receipts, exports and foreign investment.
Investment Minister Mahmoud Mohieldin said Egypt would be content to attract around $10 billion in foreign direct investment (FDI) in the current 2008/09 fiscal year. That is well below the record level of around $13 billion achieved in 2007/08.
Egypt said last week it was maintaining its growth target at 6 to 7 percent for the current 2008/9 financial year and would take steps to counteract any fallout from the global crisis.
The government was looking at ways to offset possible declines in foreign investment and to support exports to countries that could go into recession, Trade and Industry Minister Rachid Mohamed Rachid said.
El-Okdah said the central bank does not see a need to intervene in the market to support the Egyptian pound’s exchange rate. “Of course we intervene when there is something abnormal … but I do not see the worry about the weakness (in the pound exchange rate), he told a news conference.
“I don’t have to interfere.
At the same time, El-Okdah said, the CBE’s monetary policy will not ignore the turmoil in the financial markets and will act to support economic growth.
“We will pursue the policy that will still achieve our overall objective, but we will not by any means ignore what is happening in the market and (will) make sure that the growth will happen and we will support that in the near future, he said.
The economy grew 7.2 percent in the 2007/8 financial year that ended in June – the highest rate of growth in more than 20 years.
The main effect in Egypt from the crisis has so far been a sharp decline in share prices on the stock exchange, with the main index losing over 22 percent of its value this month. But officials have said current prices did not reflect the underlying value of Egyptian companies.
Meanwhile, the median overnight interbank rate on the Egyptian pound rose to 11.9 percent on Sunday from 11.851 percent on Thursday as foreign investors sought to convert pounds to dollars, squeezing liquidity, dealers said.
Dealers said they believed foreign investors who had exited the Egyptian stock market in recent days due to the global financial crisis were trying to convert their pounds to dollars, causing some banks to be short in pounds.
Six out of 10 banks contacted by Reuters reported dealing in the overnight interbank market at rates between 11.65 and 12 percent. Two banks reported dealing in one-week money at 12 percent.
“The market is a little bit short because of the dollar appreciation, one dealer said, adding that he believed foreigners exiting the country were behind the demand for hard currency. “They are buying dollars.
Another dealer added: “Over the past week there has been more demand than normal, although there is still excess liquidity.
Egypt’s benchmark CASE 30 stock index has lost over 22 percent of its value so far this month. Foreign and non-Egyptian Arab investors were net sellers on Sunday by nearly LE 60 million ($10.86 million.)
The Egyptian pound depreciated to LE 5.5236 to the dollar by 1200 GMT, compared with Thursday’s closing weighted average of LE 5.5059.-Reuters
