Five things you need to know about the EGP flotation

Ahram Online , Thursday 3 Nov 2016

The Egyptian Pound
(Photo: AP)

The dollar rate

The price of EGP 13 per dollar is just a temporary rate set by the Central Bank of Egypt (CBE) on Thursday and it does not apply to the US currency’s future rates, as local lenders are now authorised to set the exchange rate depending on their financial positions.

“The exchange rate has become the responsibility of the Egyptian banks, which have one of the best financial positions among the emerging markets,” CBE governor Tarek Amer said during a press conference on Thursday.

Accordingly, the rate of the US dollar will vary between local lenders and will no longer be set at a fixed price.

No more weekly auction

The CBE is ending its weekly forex auction that was scheduled every Tuesday to sell $120 million to the local banks, as the CBE will try to increase the country’s foreign reserves to reach $25 billion by end of this year.

The foreign reserves currently stand at $19.6 billion.

“After today’s [liberalisation of the exchange rate], the dollar’s yield at the Egyptian banks rose eight-fold,” Amer said.

However, he added that “the CBE will always be ready to intervene to reform the exchange rate in order to control the prices in the market.”

Abolition of limits and restrictions on transfers and deposits

The expatriate transfers have been made free of commissions in an attempt to attract more amounts.

The net official and private transfers, including workers’ remittances, have significantly fallen by 29.5 percent to register $16.9 billion in 2015/16 versus $21.9 billion in the prior fiscal year.

The CBE also said that there will be no limits on foreign currency deposits or withdrawal for both individuals and firms regarding the essential commodity imports.

However, a previous cap of $50,000 in cash deposits per month and $30,000 in withdrawals per day for importers of non-essential goods will remain in place.

Credit and debit cards

As several Egyptian banks have put limits on debit and credit card purchases and ATM withdrawals abroad, Amer said that the restrictions imposed on credit and debit cards are to be revised by banks, not the CBE, where this measure will fight the misuse of the electronic cards within the parallel market.

In October, the central bank deputy governor Gamal Negm said that one man was caught with 320 credit cards that he used to buy US dollars abroad and sell them on the black market in Egypt at inflated rates.

The number of issued debit cards in Egypt was around 13.2 million, while credit cards were up to 3.8 million by June 2016.

Customs and Air tickets

Both the Egyptian Customs Authority and the state carrier EgyptAir will revise their tariffs and prices to comply with the new EGP exchange rate against foreign currencies.

“We [the customs authority] have started to implement the new exchange rate as of Thursday in all airports, seaports and customs outlets,” Al-Ahram Arabic news website reported, citing the head of the authority Magdi Abdel-Aziz.

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