Egypt Lifts Remaining Currency Restrictions as Crunch Abates

CAIRO (Capital Markets in Africa) – Egypt’s central bank lifted its last remaining official foreign-currency controls, as a dollar shortage that stymied the economy receded since authorities floated the pound and introduced wide-ranging reforms.

The regulator removed limits imposed in 2015 for deposits and withdrawals by importers of non-essential goods, the bank said in a statement Tuesday. Deposits had been restricted to $10,000 per day and $50,000 monthly, while withdrawals were capped at $30,000. Caps on foreign-exchange transfers, limited to $100,000 shortly after the 2011 uprising that ousted former President Hosni Mubarak, were lifted in June.

“We saw it as appropriate to remove the caps today because the market has strengthened, our foreign-currency resources have increased” and now come from more diverse sources, said Rami Aboul Naga, a sub-governor at the central bank.

Egypt’s financial markets have been transformed by the decision to lift most foreign-exchange controls to tackle a burgeoning black market. The currency float, along with subsequent fuel subsidy cuts, helped Egypt finalize a $12 billion International Monetary Fund loan that bolstered investor confidence in the economy.

Egypt has received $57 billion in investments and transfers from abroad since Nov. 3, 2016, Aboul Naga said. The total was $40 billion as of the beginning of August.

“This decision confirms the impression that supply and demand are matched in the market,” said Radwa El-Swaify, head of research at Cairo-based Pharos Holding, adding that she didn’t foresee a significant impact on the exchange rate or on business activity as a result of Tuesday’s move because not many businesses were affected by the caps. “It is more of a sign of confidence the central bank is sending.”

The pound weakened 0.3 percent to 17.77 per dollar at 2:29 p.m. in Cairo, according to data compiled by Bloomberg.

Egypt has taken advantage of investor sentiment to boost its foreign-currency reserves to a record high, coupled with a surge in external debt. The central bank said in September that a backlog of foreign-currency requests from importers and foreign companies had been cleared, highlighting the abundance of dollars in the market.

Even so, the pound has halved in value against the dollar since the float, helping to send inflation soaring above 30 percent and pressuring Egyptians already suffering from years of social, political and economic turmoil.

Source: Bloomberg Business News