UPDATE 1-IMF says welcomes Egypt's effort to safeguard reserves

Mon Dec 31, 2012 11:20am EST

WASHINGTON Dec 31 (Reuters) - The International Monetary Fund said on Monday it welcomed steps that Egypt has taken to stop a drain on its international reserves, which had let the Egyptian pound hit record lows.

"We welcome the measures taken by the Central Bank of Egypt to ensure that the country will continue to maintain a level of international reserves that can support its international trade and payments," an IMF spokeswoman said. "IMF staff is in close contact with the authorities and we remain strongly committed to supporting Egypt."

Egypt, which has spent more than $20 billion over the past two years to defend the pound, imposed a new currency regime on Saturday that includes regular foreign currency auctions. The pound hit record lows in auctions on both Sunday and Monday in what appeared to be an effort to achieve an orderly devaluation.

The IMF's stamp of approval is important because Egypt is hoping to secure a $4.8 billion loan from the lender.

It won preliminary approval for the loan in November, but delayed seeking final approval until January to buy time to explain a heavily criticized package of economic austerity measures to the public.

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