Egypt is making efforts to eliminate the black market for US dollars in order to increase its foreign reserves and improve the country’s investment environment.

The latest initiative taken by the central bank, in early February, was to cap the amount of dollars that companies and individuals can deposit in banks.

The aim of this move is to prevent people from exchanging large volumes of dollars outside the conventional banking system and then depositing their funds in banks.

The policy follows the central bank’s decision to allow the depreciation of the Egyptian pound in order to narrow the gap between the rate offered by the black market compared with the conventional market. 

The currency has now started to stabilise, with the latest auction, held on 8 February, seeing the pound sold at 7.5 against the dollar for the fourth time in a row.

This is in comparison with the sharp depreciations seen in January, with the pound falling to a low of 7.4 against the dollar on 26 January.

The black market developed after the 2011 revolution as the central bank tried to prevent the massive devaluation of the pound caused when tourists and investors fled the country.

Efforts to defend the pound ended up having a detrimental effect on the country’s foreign reserves as well as spawning a black market for dollars.

The government is now attempting to eliminate the black market and depreciate the Egyptian pound to a level that will help attract increased foreign investment into the country as well as more remittances into the banking system from Egyptians abroad.  

The government is preparing to host its investment summit in Sharm el-Sheikh, where it will present several projects to international investors, aiming to attract investment into its power, energy, transport and industrial sectors.

In June 2010, net foreign reserves stood at a high of $35.2bn before falling to a low of $14.9bn in June 2013.

Since then, under the rule of President Abdul Fattah al-Sisi, reserves have started to edge upwards. In January, reserves reached $15.4bn rising from $15.3bn in December, according to the central bank.