CAIRO (AP) — Egypt's central bank conducted an exceptionally large foreign exchange auction on Sunday, selling $600 million to banks that urgently need money to pay for basic imports like wheat and materials for industry and medicine.
The central bank said in a statement that the auction, which is five times the usual weekly amount, was aimed at encouraging the banking sector to bolster the domestic economy. It sold at 6.87 Egyptian pounds to the U.S. dollar.
A banker with inside knowledge about the auction said banks in Egypt were running low on dollars for vital imports. He spoke on condition of anonymity because he was not authorized to brief reporters.
He said that the central bank, which uses an intermediary for the sale of U.S. dollars, prioritized banks that do not typically receive the bulk of money they bid for and whose customers import staple commodities among other needed goods.
Egypt imports much more than it exports. It is the world's largest importer of wheat.
The bank said in its statement that the "exceptional auction" required banks to provide details about their clients' needs in importing medicine and vaccines, as well as commodities like meat, poultry, oil, beans, lentils, butter and corn.
Egypt's economy is burdened by heavy subsidies of wheat and fuel, and more than half of the population relies on them for survival. Fuel shortages in recent months have crippled life for millions across the country.
The banker, who was involved in Sunday's auction, said that for the past five days he and his colleagues worked on producing lengthy, detailed reports about their clients' needs for paying foreign sellers.
While he said that Sunday's sale almost fully met his bank's needs, he did not expect the central bank will be able to hold many auctions of this kind. The bank did not specify when another auction of this kind would take place.
Foreign reserves stood at $13.4 billion at the end of March, a critical low that does not cover three months' worth of imports. The reserves stood at $36 billion before the January 2011 uprising that ousted longtime President Hosni Mubarak.
Qatar, which has warm ties with Egypt's powerful Muslim Brotherhood group, has thrown the government several lifelines by injecting $5 billion into the country's central bank. It pledged another $3 billion last week.
The government of President Mohammed Morsi, who comes from the Muslim Brotherhood, is in talks with the International Monetary Fund for a $4.8 billion loan to bolster the country's battered economy and help cover a widening budget deficit. The talks have dragged on for more than a year.
Worried residents rushed to exchange Egyptian pounds for dollars late last year amid widening political turmoil that has rocked the country's economy for the past two years.
The bank has been auctioning U.S. dollars to help regulate devaluation of the Egyptian pound, which has dropped 11 percent of its value against the dollar since early December.
Economic experts have suggested that the pound was overvalued and will continue to slide.