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Thursday, 17 October 2019

Egypt to introduce prison terms for forex black market traders

Reuters , Thursday 9 Jun 2016
U.S. dollar
A customer counts his U.S. dollar notes in a bank in Cairo, Egypt March 10, 2016 (Reuters)
Views: 3840
Views: 3840

Egypt's government approved on Wednesday prison sentences for traders selling foreign currency outside the official exchange rate, marking an escalation in the central bank's crackdown on a black market it says destabilises the country's currency.

The cabinet said in a statement that it had passed draft amendments to a law regulating the foreign exchange market.

The central bank has been cracking down on exchange bureaux trading dollars at a rate far outside its set range but the gap between official and black market rates continues to widen and a March devaluation failed to ease an acute dollar shortage.

The bank kept the pound steady at 8.78 pounds against the dollar at its official foreign currency auction on Tuesday, and the currency was stronger on the black market at 10.9 pounds per dollar, stronger than last week's 11 pound rate.

Egypt has struggled to restore growth since the 2011 uprising that toppled President Hosni Mubarak scared away tourists and foreign investors - vital sources of the foreign currency it needs to import everything from fuel to food.

Eradicating the black market is essential to restoring investors' confidence, easing the risk that the pound's volatility will erase their profits.

The amendments introduce prison sentences for individuals breaking the foreign exchange law, with jail terms ranging from six months to three years and fines ranging between 1 million to 5 million Egyptian pounds. ($115,000-565,000)

They also grant the central bank governor the power to suspend any exchange bureau's license for a year in case of any infraction and to impose a similar fine. Repeat offenders can have their licenses permanently revoked.

The cabinet also introduced a three to 10-year prison term for anyone caught trading foreign currency outside the banking system or approved institutions.

The amendments still have to be debated and passed by parliament and signed into law by President Abdel Fattah al-Sisi before they take effect.

The central bank, which hoped the 13 percent devaluation in March would relieve downward pressure on the Egyptian pound, has already resorted to legal force. In February, it revoked the licences of four exchange companies with 27 offices.

Traders say the crackdown has only exacerbated the crisis. People with dollars are shunning the official financial system, starving it of foreign currency. This is putting more pressure on the pound, with potentially dire consequences for inflation, confidence and economic growth.

Foreign investors are struggling to repatriate earnings because foreign reserves have more than halved since 2011 to about $17.52 billion in May.

This has made it hard for them to convert pound earnings into foreign currency through the banking system.

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09-06-2016 09:27pm
Finally!!!! The authorities standing up to these thieves! Now they just need to rush this through Parliament, then start sending people to shops undercover to buy at the inflated rate and then jail them! These shop owners are making small business owners bankrupt all the while they sit behind their counters making money from the nations downfall.
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Sam Enslow
09-06-2016 01:39pm
Face reality
The Black Market value of the pound is its true value. Efforts to pretend otherwise will only expedite the devaluation of Egypt's currency. The more the value of the pound is seen as artificial, the faster the decline. There have been reports of rich Arabs traveling to Egypt with dollars, buying pounds on the Black Market, then returning home to deposit thepounds to reap dollars at the official rate. Years ago this game was played with the British pound/Egyptian pound. The devaluation hurts, but pretending will hurt far more. Governments playing with their currencies never ends well.
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09-06-2016 01:23pm
You can’t jail the free market
The currency of a country is the mirror reflecting its economy; and the pound will continue to decline, even to 20 to a Dollar, no matter whom the incompetent government want to blame this time or jail. With EVERY economic indicator down how the pound is expected to stabilize or rise? The incompetent cabinet can fabricate a 5% GDP fake growth numbers but they can’t fake the real value of the pound. The real value is what the FREE market is prepared to transact at, not what bureaucrats theoretically dictate!
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