Dealers blamed for causing currency crisis this year
Egypts parliament has approved a cabinet bill allowing the government to prosecute and imprison black market foreign exchange (forex) dealers, which have been blamed for causing a currency crisis this year.
According to the state-run Middle East News Agency (MENA), the law sets jail sentences of six months to three years as well as fines reaching £E5m ($562,892) for traders charged with breaking the 2003 foreign exchange law.
The Central Bank of Egypt (CBE) recently asked parliament to address the danger posed by black market trading as Egypt struggles to maintain the required level of dollar liquidity.
The move comes as a shortage of foreign currency continues to bolster the foreign exchange black market. The black market price for dollars is currently sitting at about £E12 up to 15 per cent above the banks official rate, which is £E8.78, following a 13.5 per cent devaluation in March.
Observers expect a managed devaluation over 2016 to bring the official exchange rate closer to black market rates.
Despite the long-term advantages of devaluation, there has been a negative short-term impact on the local market since the March devaluation. On 19 June, the CBE decided on a 1 per cent increase in its basic interest rate, allowing for deposit and lending rates to reach 11.8 per cent and 12.8 per cent respectively.
The decision took the central bank interest rates to a 11-year high. The rate hike followed news that inflation in Egypt reached 12.4 per cent in May as price pressures continued following the devaluation of the pound in March this year.
Egypts foreign reserves have also suffered and recently dropped to the lowest level in more than a decade, reaching $15.5bn in July. The central bank said it repaid $1.02bn for Qatars holding of Egypts sovereign eurobonds and $714.4m to Paris Club creditors as well as the first installment of a Libyan deposit with the regulator.
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