Egypt Said to Weigh Tighter Regulations on Currency Bureaus

  • Authorities targeting black market to end dollar shortage
  • Central bank devalued the pound and raised rates last week

Egypt’s central bank is weighing tougher regulations on foreign-exchange dealers, part of a broader effort to crack down on the black market and end a hard currency shortage that’s impeding economic growth.

The bank wants to reduce the number of foreign-exchange bureaus from more than 140 and introduce measures to improve transparency, said a person familiar with the matter, who asked not to be named because they’re not authorized to speak to the media. Central bank Governor Tarek Amer declined to comment when contacted by Bloomberg.

Officials have said speculation is partly responsible for the weakening of the local currency on the black market, contributing to the dollar shortage. The bank devalued the pound last week and has injected about $2.4 billion in hard currency into the market this month, a move seen as targeting speculators.

The black market “exists either because of speculation, or because the official rate doesn’t match supply and demand,” said Ziad Waleed, an economist at Cairo-based Beltone Financial. “Since no one really knows what the equilibrium exchange rate is, the central bank is trying to fight the parallel market on both fronts, by devaluing the pound and by cracking down on traders."

If the shortage of dollars derives from an official exchange rate that doesn’t reflect the pound’s true value, people will continue to use the black market to get hard currency “no matter what,” he said.

No Surprise

A crackdown on currency traders has been widely predicted in Egyptian media. On Sunday, the Al-Shorouk daily reported that some bureaus may temporarily halt operations to avoid incurring losses from trading at the official price.

The pound weakened to a record-low 9.82 per dollar on March 8 in the black market before rebounding after the central bank officially devalued the currency. The central bank last sold dollars to local lenders at 8.78 on Thursday.

On Sunday, the regulator said it will start selling $120 million to banks in one offering every week. The bank previously held three sales of $40 million a week.

Amer’s predecessor, Hisham Ramez, tried unsuccessfully to close down the black market by imposing limits on bank dollar deposits, contributing to the currency crunch. Amer reversed most of those limits this year, and raised interest rates last week to attract dollars back into the banking system.

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