The Central Bank of the United Arab Emirates (CBUAE) and Central Bank of Egypt (CBE) entered into a more than $1 billion bilateral swap deal in local currencies on Thursday.

The CBUAE and CBE said in a joint statement that the agreement allows for the exchange of UAE Dirhams and Egyptian pounds with a nominal amount of up to 5 billion dirhams ($1.36 billion) and 42 billion Egyptian pounds.

Egypt has been suffering from a hard currency crunch with the Egyptian pound falling by about half against the dollar since March 2022 after the Ukraine crisis exposed its economy's vulnerabilities.

The United Arab Emirates, along with other Gulf states Saudi Arabia and Qatar, have made deposits in Egypt's central bank and pledged major new investments there to ease the country's financial difficulties.

CBUAE Governor Khaled Mohamed Balama said "the CBUAE is keen to deepen its cooperation with the CBE to achieve common interests, positively impact the trade, investment and financial sectors, and enhance financial stability," the statement quoted him as saying.

Egypt's Central Bank Governor Hassan Abdalla added: "I am confident (the agreement) will bolster cooperation between both financial sectors in their respective currencies".

($1 = 3.6729 UAE dirham, 30.8500 Egyptian pounds)

(Reporting by Nayera Abdallah, Writing by Clauda Tanios. Editing by Jane Merriman and Hugh Lawson)