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Egypt central bank eases control on foreign transfers - ASHARQ AL-AWSAT English Archive
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File photo of people and vehicles are seen caught in a traffic jam in front of the Central Bank of Egypt's headquarters in downtown Cairo. (Reuters/Amr Abdallah Dalsh)

File photo of people and vehicles are seen caught in a traffic jam in front of the Central Bank of Egypt’s headquarters in downtown Cairo. (Reuters/Amr Abdallah Dalsh)

Cairo, Asharq Al-Awsat—The Central Bank of Egypt has eased restrictions on foreign currency transfers abroad, allowing individuals to make a one-time transfer of up to 100,000 US dollars this calendar year.

In a letter circulated to Egyptian banks on Monday and posted on its website on Tuesday, central bank Governor Hisham Ramez asked the country’s banks to implement the new decision from the beginning of January 2014.

Previous restrictions effective since February 2011 allowed individuals to make one transfer of 100,000 US dollars, for the entire three-year period since the uprising that toppled former President Hosni Mubarak.

Under the new regulations, the one-time transfer can be made during 2014.

The central bank did not state if further transfers could be made after year’s end, though the country’s interim deputy prime minister, Ziad Bahaa El-Din, had stated in previous comments to the press that Egypt was looking to ease capital controls significantly.

Since the January 25 revolution in 2011, The central bank has set the limit on foreign currency transfers to stem the flow of foreign cash out of the country. Egypt’s foreign currency reserves plunged steadily from 36 billion US dollars at the end of 2010 to 13.424 US dollars in March 2013, an amount barely enough to cover three months of exports.

Speaking to Asharq Al-Awsat, the general director of the Misr Iran Development Bank (MIDB) Hamdi Musa said the move would be a “lifeline” for individuals who had been affected negatively by the previous restrictions.

“Some Egyptians with dollar-denominated bank accounts who had investments abroad had to finance payments through instalments in light of the restrictions, as a result of not being able to make large one-time payments abroad,” he said.

He added that the new move would facilitate transactions in light of “the recent improvements in Egypt’s economy.”

Following former President Mohamed Mursi’s ouster in July, Egypt has received 12 billion US dollars in aid from several Gulf countries, including Kuwait and Saudi Arabia.

Such aid has helped stabilize the country’s economy during the interim period, but many analysts predict the government must enact substantive reforms in order to ensure stability in the long run.

Many international investors pulled out after the February 2011 overthrow of former President Hosni Mubarak, as the political instability widened Egypt’s balance of payments and budget.

“In the aftermath of the January 25 revolution, there were huge demands for hard currency in Egypt for the purpose of transferring funds abroad, some of which were done legally and others illegally,” said Musa.

But Musa said that now “all indications are positive for the economy” and that “foreign investors are returning.”

“The dollar is now flooding the market again—whether legally or through the black market—and that the central bank is now fulfilling 60–70 percent of all US dollar requests from local banks,” he said.

In a December Reuters survey of leading Middle East-based fund managers, almost half of those polled expected to raise their equity allocations to Egypt in the next three months, with none planning to reduce exposure.

The survey showed funds were not worried about a deterioration in public security despite recent attacks in the country, and were instead buoyed by news of the billions of dollars of aid from the Gulf that was allowing the government to assemble large economic stimulus packages.