- Central bank leaves caps in place for corporate bank accounts
- Decision comes after pound falls to record low in black market
Egypt removed restrictions on the amount of foreign currency individuals can deposit and withdraw from banks, as authorities seek to ease the damage from an intensifying dollar shortage.
Banks are still required to maintain caps on corporate accounts, Egypt’s central bank said in a statement on its website on Tuesday. The regulator had limited foreign currency deposits to $50,000 per month since February last year, before easing the rule for some companies in January to allow them to deposit up to $1 million a month.
Tuesday’s change comes after the shortage of hard currency drove the Egyptian pound to a record low on the black market, where it trades at about a 20 percent discount to the official rate. The regulator has resisted calls from local investors to devalue the local currency out of concern that would stoke inflation in a country where half of the population lives near or below the United Nations poverty line.
“The central bank is fixing a mistake that happened a year ago," said Omar El-Shenety, managing director of Cairo-based investment bank Multiples Group. “They are trying to connect the black and official markets, so that even if people are speculating, they don’t stash their money at home."
The decision will help to boost Egypt’s foreign currency reserves, the Youm7 newspaper cited central bank Governor Tarek Amer as saying on Tuesday. The bank is aiming to raise reserves to $25 billion from about $16.5 billion by the end of the year, Amer said.
Foreign currency inflows have slowed in President Abdel-Fattah El-Sisi’s second year in office, as Egypt’s Gulf Arab allies reduced aid amid tumbling oil prices and as the country’s tourism industry slowed after the bombing of a Russian passenger plane over Sinai. Overseas investors have also avoided Egyptian equities and bonds due to the perceived overvaluation of the Egyptian pound.
"This is a positive step, but there should be many more," said Sherif El-Gabaly, head of the chemical industries division in the Egyptian Federation of Industries. “Now we need them to remove or raise the deposit limits for importers of intermediary goods whose businesses are struggling.”