Egypt Central Bank Eases Restrictions on Dollar Depositsby
Monthly deposit cap raised to $250,000 for some importers
Cap is blamed for exacerbating foreign-exchange shortage
The Central Bank of Egypt eased restrictions on dollar cash deposits blamed for exacerbating a foreign-currency shortage that has threatened the country’s economic recovery.
The bank raised the monthly limit to $250,000 from $50,000 for importers of food, machinery, spare parts, capital goods and medicine, according to a statement posted on its website on Tuesday. Policy makers removed a daily ceiling for the same group of importers as long as they don’t exceed the monthly cap.
Under Governor Tarek Amer, who took charge of the central bank in November amid a national debate on currency policy, authorities have taken steps to bolster confidence in the Egyptian pound and counter speculation of an imminent devaluation. The bank repaid foreign portfolio investors and introduced tighter regulations on imports.
“It is a positive step,” said Ziad Waleed, an economist at Cairo-based investment bank Beltone Financial. “Given that the majority of Egypt’s imports fall under the CBE classification of basic goods, today’s decision will definitely be positive for economic activity.”
The dollar deposit restrictions were introduced by Amer’s predecessor to crack down on black market trading and preserve foreign reserves. At more than $16 billion, foreign reserves are down by more than 50 percent from their 2010 levels, though they have stabilized in the last four months.
Critics blame the rules for hindering the recovery of the private sector, which contracted nine out of 12 months last year, according to the Emirates NBD Purchasing Managers Index.
The central bank kept the $50,000 monthly limit in place for individuals and other types of companies.
Amer said in an interview this month that rules to curb what he described as unnecessary imports may save about $20 billion this year, improving the balance of payments. Authorities have tightened rules to finance the imports of goods deemed non-essential and have asked importers to register their foreign suppliers with the government.
Waleed said Tuesday’s announcement makes it “clear that central bank is serious about regulating imports.”
The central bank’s Monetary Policy Committee will meet on Jan. 28 to review interest rates. The bank raised borrowing costs by 50 basis points on Dec. 24 and said it seeks, in coordination with the government, to “avoid double-digit inflation rates over the medium term.”