EGP for AED: The Egyptian and Emirati central banks reached a currency swap agreement on Thursday worth almost USD 1.4 bn, the two sides said in a joint statem ent. Under the agreement, the Central Bank of Egypt (CBE) will be able to obtain up to AED 5 bn (USD 1.36 bn) in return for EGP 42 bn.

“It seems again that the UAE is providing Egypt with financial support,” James Swanston, emerging-markets economist at Capital Economics, told the Associated Press. “Egypt’s central bank needs more ammunition to prop up its currency.”

Another lifeline from our GCC neighbor: The nominal value of the agreement has an implied exchange rate of EGP 8.40 for every AED, in line with the official rate, economist Mona Bedeir told Enterprise yesterday. The timing of the agreement is important as we continue to grapple with securing FX liquidity to meet import needs, including oil and debt obligations, Bedeir added.

What they said: This currency swap “contributes to facilitating and increasing trade exchange between the two countries,” said CBE governor Hassan Abdalla. The agreement “represents an opportunity to develop economic and financial markets between the two sides,” said Khaled Balama, governor of the Central Bank of the UAE.

Next up: A CNY swap? The Egyptian and Chinese central banks discussed a potential swap line during talks in Beijing last week, the CBE said Wednesday. The delegation, led by Abdalla, also talked about Egypt’s plans to issue USD 500 mn of CNY-denominated panda bonds in China.

Egypt, China could expand the use of RMB in future projects: The president of the China Development Bank (CDB), Tan Jiong, agreed to explore increasing the use of the RMB in local projects as well as joint financing activities during talks with Abdalla, according to a separate CBE statement. Hossam Heiba, head of the General Authority for Freezones and Investment (GAFI), floated the idea last month, saying talks were ongoing that could see RMB-denominated investment in Egypt.

Remember: The CBE signed a three-year agreement with China in December 2016 that saw China deposit CNY 18 bn against the equivalent in EGP, which expired at the end of 2019. The government had considered renewing the agreement in 2020 before the outbreak of covid-19.

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