Mubasher: The Yuan currency swap with the Egyptian entails some limitations on the use of this deal by the Egyptian government, said Pharos in a Sunday's report.
"It cannot be used to repay USD-denominated debt and it cannot be used to import goods or services from another country except for China", the research firm explained.
Last Thursday, a government official, who preferred to remain anonymous, was reported in some local newspapers , saying that a CNY20 billion (USD2.9 billion) bilateral aid agreement with China has been concluded, which will include a deposit and a Yuan currency swap.
The value of net international reserves (NIR) can be affected in case of Yuan devaluation versus the US dollar or Yuan/USD exchange rate difference at the time of swap maturity versus that at the time of swap inception, the firmed indicated, adding that this is, however, should be a worrying matter as the Yuan-denominated portion of NIR is small.
Moreover, the deal actually supports the Central Bank of Egypt, easing local demand for USD slightly.
"We believe that acquiring a Yuan currency swap provides the CBE with an extra tool to stabilize the current high USD demand, in addition to more FX liquidity at a reasonable cost", the firm concluded.
