The North African nation’s central bank said the sales and purchases of U.S. dollars will take place periodically and aim to “preserve foreign-currency reserves and ration their use,” according to an e-mailed statement today. The new mechanism will support the dollar interbank market, it said. Egypt’s net international reserves have slumped almost 60 percent in the two years since the start of an uprising that ousted former President Hosni Mubarak.Egypt needs dollars for food. If food prices rise, Egypt will go hungry.
“The current level of foreign-currency reserves constitutes the minimum and critical level that must be preserved” to meet necessary needs like repaying external debt and importing “strategic commodities,” the central bank said in the statement.
Market Vectors Egypt Index ETF (EGPT) rallied post-Spring, but it will reach new lows as the currency collapses.