The Central Bank of Egypt (CBE) on Tuesday removed caps for the deposit and withdrawal of foreign currency for importers of non-essential goods, in what could be the latest sign of improving dollar liquidity in the Egyptian banking system.
Earlier this year, the CBE scrapped limits on transfers abroad as the liquidity situation improved.
The country 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.
The limit on deposits was intended to curb the black market by stopping importers from sourcing their dollars there.
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 programme adopted in 2016, which also included tax hikes and subsidy cuts.
“I think the move is useful in terms of the practicality of the private sector being able to access foreign currency,” Angus Blair, chief operating officer of investment bank Pharos Holdings told Daily News Egypt.
But Blair, who has been working on Egypt’s economy for almost 25 years, has asked the step to be introduced carefully.
“But the other positive point is, in terms of business sentiment, the private sector will be helped by this decision,” he added.
The CBE’s foreign reserves have climbed in the year since the reforms began, hitting $36.7bn at the end of October, roughly twice as much as before the IMF agreement.
“This is positive but expected, given foreign exchange liquidity having improved substantially in banks since the currency flotation,” Allen Sandeep, head of research at Naeem Brokerage, told Reuters.
“What we would be keen to see from here, however, is whether this would have an impact on the exchange rate,” he added.
The Egyptian pound was trading at around 17.65 per US 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 programme, and the IMF board is expected to approve a third, $2 billion disbursement of funds within weeks.