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Wednesday, December 6, 2017

Egypt Lifts Its Last Remaining Foreign Currency Restriction

Egypt Lifts Its Last Remaining Foreign Currency Restriction
Source: www.ft.com

 

As of Tuesday, November 28, the Central Bank of Egypt has lifted its only remaining official foreign currency control. This control imposed limits on deposits and withdrawals by importers of non-essential goods.

“Deposits had been restricted to $10,000 per day and $50,000 monthly, while withdrawals were capped at $30,000," according to Bloomberg.

In June, Egypt decided it was time to lift their cap on foreign exchange transfers as a result of an improvement in their liquidity situation. This cap had limited foreign exchange transfers to $100,000.

These restrictions, first imposed by the Central Bank of Egypt in 2012, were put in place to preserve foreign currency due to a dramatic decrease in the flow of dollars to the economy.  

This decrease was due to the 2011 uprising that drove away tourists and foreign investors. As a result of this shortage, authorities floated the pound along with creating the restrictions.

In order to cope with this setback in foreign currency coming in, importers began to rely on the black market for dollars. The limit on deposits and withdrawals by importers was implemented to deter importers from sourcing dollars through the black market.

 

 
 

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Although the Egyptian pound has weakened against the dollar, inflows of foreign exchange into the system have greatly improved since the reforms were put in place

With the lifting of Egypt’s last foreign currency restriction, there is hope they will be able to maintain their influx of dollars and see an impact on their exchange rate.

 

 

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Posted By Jennifer Danuff at 02:00 PM
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