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Dollar panic besets Egypt amid devaluation fears

Ongoing rumours about a devaluation of the pound and future economic turbulence lead to brisk trade at banks as Egyptians withdraw and convert deposits

Bassem Abo Alabass, Thursday 27 Dec 2012
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Egypt is being hit by a dollar shortage as some Egyptians rush to convert their local savings into foreign currencies amid signs of further economic turmoil ahead.

Foreign exchange bureaus have seen heavy trade for the last two days with the Egyptian pound falling to 6.18 to the dollar on Thursday, its lowest level in eight years.

An anonymous source in the leading money transfer company Western Union told Ahram Online Wednesday that they had to put specific restrictions on dollars transfers into Egypt due to heavy demand from customers in the last two days.

Western Union denied Wednesday evening a suspension of US dollar transfers, confirming that its work will continue normally.

Banks, too, have experienced brisk trade as some citizens withdrew their savings. According to Beltone Financial, the Egyptian investment bank, on Thursday Shahinaz Foda, deputy managing director of BNP Paribas, said the problem is a banknote shortage rather than a liquidity crisis.

“Our clients think that the bank is going to freeze their deposits, so many of them have applied to withdraw their monies and convert them into dollars,” explained an HSBC manager who requested anonymity.

This followed rumours that the governor of the Egyptian Central Bank was set to resign due to the state of the economy and the possibility of floating the currency.

Govenor Farouq El-Oqda on Sunday denied TV reports that he was set to step down.

Foreign exchange specialists contacted by Ahram Online gave a mixed picture of the alleged dollar crisis.

A representative from the Arab African International Bank described the situation as "so far stable," saying its customers are still able to buy any amount of dollars they wish.

But Mohamed Mostafa, the owner of a currency exchange shop, said that his three offices are seeking dollars and Euros because of fears among Egyptians of a coming devaluation of the pound.

On Tuesday, President Mohamed Morsi modified banking regulations in order to tighten foreign currency transfers from and to Egypt. Travelers to and from Egypt will not be allowed to carry more than $10,000 or its equivalent.

“This decision was supposed to be issued immediately in the wake of the last year’s uprising, so then we would not witness this big fall in our foreign reserves and this current stance in the market,” Mostafa told Ahram Online.

The spokesperson of the Egyptian Cabinet, Alaa El-Hadidi, stated Wednesday that challenges and risks constrain the forward steps of the country’s economy.

He added that the government is trying to resume talks on a suspended $4.8 billion loan from the International Monetary Fund, in order to boost the financial situation.

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