Egypt’s Dollar Black Market Returns as Shortage UnresolvedAhmed A. Namatalla
Egypt’s black market for dollars has reappeared less than three months after the central bank declared it finished.
Traders outside the banking system are charging 7.699 Egyptian pounds per dollar, according to the average of four dealers surveyed by Bloomberg today. That’s up from 7.636 on March 17, and represents the first time it has fallen out of the central bank-set range of 5 piasters from the official 7.6301 per dollar interbank price.
Dollar demand is resurfacing even as bank deposits remain capped at $50,000 per month. The deposit limit, coupled with a 6.3 percent official devaluation of the pound, had eliminated a black market dollar premium of as much as 9.4 percent in January, and the central bank declared it over the following month. Egypt hasn’t disclosed how it will use $6 billion of aid sent by its Gulf allies this month to help fix its ailing economy.
“Those funds should be aggressively employed to satisfy pending repatriation requests, the imports-demand backlog for dollars, and erase the words ’capital controls’ from our dictionary,” Hany Farahat, a senior economist at Cairo-based CI Capital, said by phone on Tuesday. “If the status quo remains, it could threaten potential foreign-investment inflows.”
The central bank instructed lenders in a letter dated April 23 to prevent clients from using proxy accounts to collect funds exceeding the deposit limit in order to finance imports or foreign-currency debt. Some portfolio investors are still unable to repatriate their money, according to Cairo-based investment banks CI Capital and Pharos Holding.
The central bank hasn’t commented on fund repatriation since announcing a year ago that it has settled all outstanding dues to foreign investors.
Participants in Bloomberg’s weekly currency surveys operate currency-exchange businesses in Cairo and Alexandria. They ask not to be identified because the central bank prohibits trading dollars outside its authorized range, which they engage in depending on demand.