Bank of Egypt Mulling For Tougher Foreign Exchange Regulations Cracking Down The Black Market
Mar 21, 2016 10:05 AM EDT
The Central Bank of Egypt (CBE) has been mulling to weigh tougher regulations on foreign exchange dealers to end a hard currency shortage. The move is part of a broader effort to crack down on the black market aiming to close the gap between dollar demand and supply.
CBE also intends to reduce the number of foreign exchange bureaus from more than 140 and introduce measures increasing transparency, reports Bloomberg quoting a person familiar with the matter seeking anonymity since he is not authorized to address the media. Tarek Amer, governor of the central bank has declined to comment.
A black market for dollars has absorbed liquidity from the banking system over stressing country's foreign reserves. The central bank has somehow managed to keep the pound artificially strong. It has devalued the currency from 7.7301 to 8.85 per dollar on Monday and 8.78 on Wednesday since adoption of more flexible exchange rate policy, according to a report published in Reuters.
CBE has sold $2.4 billion over the past two weeks to facilitate import of essential goods and dollar overdrafts at banks. The sold out amount addresses 15% of its total reserves which have been tumbling at $16.5 billion in February from $36 billion before the uprising, reports The Peninsula Qatar.
Bankers have been requested to deposit the same amount of dollars they received from the central bank at an interest rate of 1.2312%. The request has been made shortly after selling $1.5 billion to cover overdrafts at banks on Wednesday. Bankers blame the move for partially offsetting the efforts to eradicate the black market for dollars.
Hisham Ramez, the immediate past governor of the central bank has tried to close down the black market through imposing limit on bank dollar deposit. The move has eventually got failed contributing to the foreign currency crunch. Amer has lifted up most of those restrictions this year raising interest rates last week to attract dollars back into the banking system.
Egyptian media has been widely predicting a crackdown on currency traders. The Al Shorouk, a local dairy has forecast on Sunday that some bureaus may temporarily halt operations to avoid losses while trading at the official price.
The Egyptian pound has been weakened in the black market to a range between 9.50 and 9.55 per dollar, compared with about 9.40 per dollar last week. The weakening of Egyptian pound has taken place ignoring the CBE moves to narrow down the gap between official and unofficial rates. However, the currency traders haven't provided any information on transaction volumes.
The Egyptian black market of dollars has been witnessed to deepen further despite CBE's efforts to narrow down the gap between demand and supply of dollars. To prevent further deepening, CBE has been considering tightening the foreign exchange dealing regulations.