Cairo eases capital controls

15 June 2017

The new decision will be effective by the end of the month

The Central Bank of Egypt (CBE) has lifted restrictions on foreign currency transactions in a bid to spur foreign direct investment (FDI), according to a spokesperson at the bank.

The decision to ease capital controls in is in line with the economic reform roadmap set out under the IMF programme agreed in 2016.

Egypt will now scrap the $100,000 cap on individual transfers as well as the $50,000 monthly deposit cap on non-priority imports.

A statement from the CBE said the new decision will be effective by the end of the month and will be a relief for many foreign companies operating in Egypt who had previously struggled to repatriate profits and dividends.

The move is seen by many as an indicator that Egypt’s decision to free float its currency in November has had a positive impact on the supply of foreign currency in the country.

Egypt had battled with a shortage of hard currency over the past few years as it witnessed revenues from the Suez Canal, tourism and foreign investment decline due to the instability caused by the 2011 uprising. This was eased when Egypt secured a $12bn loan from the IMF in November last year and promised to implement much needed reforms to boost the private sector and drive economic growth.

Egypt’s foreign reserves reached $28.5bn in April this year, the highest in six years, according to a cabinet statement at the time, which also revealed that Egypt had attracted $17bn of foreign currency inflow since the flotation of the pound.

In May this year, the central bank announced that Egypt had received approximately $8bn-worth of investments and grants from 150 different global investment funds over the past six months.

Although Egypt’s foreign reserves have improved thanks to deposits from the IMF and GCC governments over the past few months, net foreign assets have been negative since the beginning of 2016. This disparity illustrates how Egypt has depended on foreign debt, such as the IMF loan and other financial support from the Gulf, to boost reserves.

Egypt net foreign assets and reserves

Egypt net foreign assets and reserves

Egypt net foreign assets and reserves

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