* Analysts say this sign dollarisation was high in December
* Turkey said to have sent Egypt $500 mln on Thursday
* Egypt pound continues to slide
* C.bank has spent almost $520 mln at auctions in 2 weeks
By Ehab Farouk and Patrick Werr
CAIRO, Jan 10 Egypt's central bank said on
Thursday that a $2 billion loan from Qatar arrived in December,
implying that the money had already been eaten up defending the
currency before the foreign reserves crisis became public late
News of the Qatari loan broke this week, and markets assumed
that Egypt therefore had a cushion that would allow it to keep
the pound's depreciation orderly, supporting Egyptian assets.
Political strife in late November and early December set off
a rush to convert Egyptian pounds to dollars, sending the
currency to record lows on concerns the government might devalue
or bring in capital controls.
The central bank, which has spent more than $20 billion
defending the pound in the two years since Egypt's popular
uprising, said on Dec. 29 that its foreign reserves had reached
a "minimum and critical limit".
It also announced a new currency regime as it struggled to
stabilise the pound. But on Sunday the bank said foreign
reserves had fallen in December by only $21 million, to $15.015
Qatari Prime Minister Sheikh Hamad bin Jassim al-Thani
announced on Tuesday that Qatar had lent the country $2 billion
and given it an extra $500 million outright.
Asked by email on Thursday if the deposit arrived in January
or December, Nidal Assar, the bank's sub-governor for investment
and foreign relations, replied: "December".
Analysts said that the Qatari deposit's arrival in December
indicated that switching out of pounds and into dollars had been
much greater than thought over the last few weeks.
"That shows the scale of dollarisation in December and
explains the shift to auctions on the part of the central bank,"
said Said Hirsh, an economist with Maplecroft.
TURNING TO IMF
Egypt has been negotiating a $4.8 billion loan from the
International Monetary Fund (IMF) to deal with the crisis and
expects an IMF team to visit Cairo in two to three weeks.
The loan agreement was approved in principle in November,
but political turmoil in December forced the government to delay
a series of austerity measures deemed necessary to win the IMF
board's final approval.
"Without Qatari aid, Egypt was on course for a full-blown
financial crisis and, perhaps, a forced deal with the IMF by
February," Hirsh said.
Egypt's ambassador to Turkey said Ankara had transferred
$500 million into Egyptian coffers on Thursday, the Egyptian
state news agency reported.
The pound weakened by 0.46 percent on the interbank market
after a central bank auction of dollars on Thursday, the eighth
such sale since it introduced a new regime to reduce pressure on
The pound has lost 11 percent since the uprising that
removed President Hosni Mubarak in early 2011, half of it during
the last two weeks. The central bank limits falls in the
currency on the interbank market about 0.5 percent per day.
The bank sold $49.1 million at its daily currency auction on
Thursday, bringing the total of amount it has sold since it
introduced the auction system on Dec. 30 to almost $520 million.
Economists and bankers said this drain on reserves is
Raza Agha, an economist with VTB Capital, said that if the
$15 billion reseves number for December included the support
from Qatar it meant that the political turmoil had pushed the
central bank to spend $2 billion to support the pound and
"It also suggests that January data is likely to show a
decline in headline reserves," he said.