Wednesday,19 September, 2018
Current issue | Issue 1287, (17 - 23 March 2016)
Wednesday,19 September, 2018
Issue 1287, (17 - 23 March 2016)

Ahram Weekly

On the way to devaluation

Compiled by Mona El-Fiqi

Al-Ahram Weekly

A series of measures has been taken over the past year to manage the dollar exchange rate against the Egyptian pound. Some of these measures have been taken through the banks to curb the black market, while others have been taken by the Ministry of Trade and Industry in an attempt to curb imports.

The new measures are meant to tackle a shortfall in hard currency that saw Egypt’s foreign reserves reach $16.5 billion at the end of February, less than half their size in 2011. The scarcity of hard currency has fed demand on the black market, pushing the dollar price to LE9.80 last week, while it was officially trading at LE7.83.

January 2014: The Central Bank of Egypt (CBE) puts a ceiling on individual dollar transfers to a maximum of $100,000 annually.

January 2015: The CBE devalued the pound to LE 7.53.

July 2015: The second devaluation in 2015 took place leaving the pound at LE7.63.

February 2015: The CBE instructs commercial banks that individuals and companies will be permitted to deposit a maximum of $10,000, or the equivalent in other currencies, per day in the banks and $50,000 per month. The move aims at reducing currency liquidity on the black market. The commercial banks had earlier placed restrictions on dollar cash withdrawals for individuals when they travel abroad, requiring them to show their passport as well as tickets to withdraw the maximum of $2,000.

October 2015: The pound weakened 1.3 percent to 7.9301 per dollar, marking the third devaluation through the year.

November 2015: The newly appointed CBE governor Tarek Amer surprised the market by a LE0.2 appreciation in the pound to reach LE7.73.

December 2015: The monetary policy committee at the CBE raises the interbank overnight interest rate from 8.5 per cent to 9.25 per cent and the overnight lending rate to 10.25 per cent. The Ministry of Industry and Foreign Trade also imposes new regulations meant to close down unnecessary and low-quality imports and protect national industries.

The regulations require that foreign companies exporting 50 items or more to Egypt be registered with the General Organisation for Exports and Imports Control. They also need to provide documentation of their operating licences and accept inspection by an Egyptian technical team to assure compliance with environmental, health and safety regulations. The regulations, scheduled to go into effect on 16 March, cover a wide range of goods.

January 2016: A presidential decree is issued raising customs tariffs on hundreds of finished goods. The list includes everything from refrigerators and kitchen appliances to cosmetics and pet food, and tariffs are raised on average by 10 per cent. Tariffs on raw materials, capital goods and production inputs remain unchanged. Customs duties, previously levied on such goods at a rate of between 10 and 30 per cent, now impose charges of between 20 to 40 per cent.

January 2016: The CBE decides to increase the ceiling for dollar deposits to $250,000, or their equivalent in other currencies, per month for companies importing staple commodities, production machinery, manufacturing components and pharmaceuticals, as exceptions aimed at facilitating such imports.

February 2016: The National Bank of Egypt, Banque du Caire and Banque Misr launch “Beladi” (My Country) investment certificates to be sold to Egyptian expatriates in dollars at attractive yields. Experts believe that the sale of these certificates will increase the three state-owned banks’ dollar funding, which is credit-positive because the banks’ dollar liquidity has tightened in recent quarters.

February 2016: The National Bank of Egypt facilitates procedures for opening bank accounts in local and foreign currencies for Egyptian expatriates for free to encourage expatriates to deposit their money in the banks instead of investing on the black market.

February 21: Tarek Amer told a popular talk show host that the pound won’t be devalued unless the reserves reach $25 billion.

March 8: The CBE lifts the monthly cap on dollar deposits for individuals.

March 9: The CBE cancels the ceiling on dollar deposits for companies dealing with the importation of essential goods.

March 13: The three state-owned banks announce they are offering euro-denominated certificates to Egyptian expatriates starting at a minimum cost of 100 euros.
March 14: The National Bank of Egypt and Banque du Caire introduce new pound-denominated saving certificates to be bought by individuals in foreign currencies at the highest yearly yield of 15 per cent.

March 14: The CBE devalue the pound by 14 per cent by selling $200 million in a special auction to the banks at a rate of LE8.85 to the dollar.

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