* Egypt central bank sells $600 mln at special auction
* Auction points to scale of pent up demand for basics
By Ulf Laessing and Asma Alsharif
CAIRO, April 14 Egypt's central bank sold $600
million to banks in a special auction of foreign exchange on
Sunday to pay for wheat, meat, cooking oil and other essential
imports to a country struggling with a currency crisis.
The size of the auction - 15 times the amount the central
bank has been selling at its regular currency auctions - showed
the extent of pent up demand for dollars as Egypt struggles with
an economic crisis two years after the ousting of Hosni Mubarak.
The hard currency was sold at 6.87 pounds to the dollar -
near the official rate. The pound is trading much weaker on the
black market where most private sector importers are having to
source their hard currency needs.
The special auction follows Qatar's pledge last week to buy
$3 billion in government bonds - a boost to foreign currency
reserves that had fallen to critically low levels below the $15
billion needed to cover three months worth of imports. At the
end of March, the reserves stood at $13.4 billion.
Foreign exchange dealers said the authorities would have to
use more dollar reserves to guarantee food supplies. Food price
inflation has stoked unrest in the past.
"The effect will be temporary because the demand is a lot
higher than this. They must do it again but it is not clear when
that will be," said a currency dealer, asking not to be named.
The central bank has been rationing sales of dollars since
late December in a system of regular foreign currency auctions
brought in to cope with the impact of a run on the pound.
At official rates, the currency has lost a tenth of its
value since then. The central bank has been holding three
auctions per week, selling $40 million at each.
Shortages of imported fuel are disrupting transport and
leading to power cuts. Egypt, the world's biggest importer of
wheat, has also cut back on international purchases this year in
the hope of a bumper local harvest.
Sunday's auction was held for banks with clients importing
staple commodities such as wheat, cooking oil, tea, meat, fish,
beans, butter, corn and baby milk, components for drugs and
vaccines as well as spare parts, the central bank said.
The central bank auction coincides with the start of the
wheat harvest for which farmers urgently need fuel supplies to
run harvesters and transport the crop to storage centres.
The central bank did not say when it would hold its next
special auction, saying only that future sales would be
announced in a statement.
Traders said the central bank was trying to clamp down on
the black market, which has flourished this year thanks to the
dearth of hard currency.
Recent pledges of foreign aid have strengthened the pound on
the black market. The foreign exchange dealer said the pound was
now trading at around 7.3 to the dollar, compared to 7.8 before
the announcement of aid from Qatar and Libya.
Reports have suggested Libya has agreed to deposit $2
billion with the central bank, though comments from its central
bank governor on Saturday indicated the funds did not amount to
a fresh injection of hard currency. He said the funds had been
deducted from other Libyan investments in Egypt.
Egypt is also in talks with the International Monetary Fund
(IMF) on a $4.8 billion loan.