Egypt central bank scraps FX restrictions for importers

Wednesday, 29 November 2017 00:00 - - {{hitsCtrl.values.hits}}

Cairo (Reuters): Egypt’s Central Bank removed caps on deposits and withdrawals of foreign currency for importers on Tuesday, lifting one of the last currency controls in place since a 2011 uprising.

The move is another sign bank liquidity is improving as a result of Egypt’s $ 12 billion three-year International Monetary Fund program and a currency flotation that halved the pound’s value and helped crush the black market for dollars.

Egypt imposed strict controls on the movement of hard currency as the 2011 uprising drove away tourists and foreign investors, key sources of foreign currency, forcing importers to rely on a more expensive black market for dollars.

In 2012, it limited deposits to $ 10,000 per day and $ 50,000 per month and set a $ 30,000 per day withdrawal limit for importers of non-essential goods.

Removing capital controls was among the reforms agreed to as part of the IMF program adopted in 2016, which also included tax hikes and subsidy cuts.

Central Bank foreign reserves have climbed in the year since the reforms began, hitting $ 36.7 billion at the end of October, roughly twice as much as before the IMF agreement.

“This is positive but expected, given FX liquidity having improved substantially in banks since the currency float,” said head of research at Naeem Brokerage Allen Sandeep.

“What we would be keen to see from here however is whether this would have an impact on the exchange rate.”

The Egyptian pound was trading at around 17.65 per dollar on Tuesday, roughly the same level as in recent months.

An IMF team this month completed its second review of Egypt’s performance under the program and the IMF board is expected to approve a third, $ 2 billion, disbursement of funds within weeks.

Friday’s attack by Islamic State gunmen on a mosque in Sinai, in which more than 300 worshippers were killed - the worst attack by militants in Egypt’s modern history - is not expected to have a significant impact on the economy.