CAIRO: Egypt’s central bank removed caps on Tuesday on how much individuals can withdraw or deposit in foreign currencies at banks, a move aimed at boosting liquidity in a market that has been starved of dollars.
Egypt, which relies heavily on imports, has been wrestling with a currency crisis and struggling to revive its economy since a 2011 uprising drove away foreign investors and tourists, both major sources of hard currency.
Reserves have tumbled from $36 billion in 2011 to $16.5 billion at the end of February and the central bank has been rationing dollars through weekly auctions.
The move eased restrictions that were imposed a year ago for individuals but the central bank said it would keep them in place for companies while the currency crisis persists.
“In reference to the instructions issued on the limits for cash deposits and withdrawals in foreign currencies … It has been decided to cancel those limits for individuals, but maintain the limits in force for corporates,” the central bank said in a statement.
In an effort to fight a black market for dollars, the central bank had capped the amount that could be deposited in banks at $50,000 a month. It also set a $10,000 a day limit on withdrawals for individuals and a $30,000 a day limit for corporate withdrawals.
The central bank is keeping the pound artificially strong at 7.7301 pounds per dollar. The black market rate hovered around 9.7 pounds this week.
The central bank had taken several measures to relieve the dollar shortage in the banking system that had affected both importers and exporters who have been unable to pay for goods and raw materials.
In January it raised the deposit limit for importers of some essential goods to $250,000 a month to relieve a dollar shortage that had resulted in goods piling up at ports.
With that move, importers were able to deposit dollars obtained from the black market in order to pay for their goods.
Last month, the central bank also raised the cap to $1 million a month for exporting companies, which also increased demand for currency on the black market.
In another attempt to increase dollar resources at Egyptian banks, the central bank launched dollar-denominated certificates last month to attract dollars from Egyptians living abroad.
“This is another move to try to attract dollars into the banking system from the parallel market,” said Ziad Waleed, economist at Beltone Financial.
“(This) might increase demand on the black market but will also increase liquidity in the banking sector,” he said.
Another banker, who declined to be named, said: “If they withdraw (dollars) from the banks and sell in the black market, the price in the black market will drop, and if they did it the other way round then liquidity in banks will increase, so it’s a good decision either way.”