Amid liquidity crisis, 2 banks tighten limits on card withdrawals outside Egypt

At least two private banks operating in Egypt announced new limits on debit and credit card withdrawals outside the country on Monday, as a liquidity crisis grips the domestic economy.

HSBC Egypt and the Commercial International Bank were among several domestic banks that first introduced varying limits on foreign currency withdrawals and purchases in October.

No official instructions were announced at the time, yet a Banque Misr employee speaking anonymously to the press said that the limits were based on recommendations put forth by the Central Bank of Egypt.

Now, both HSBC and CIB are introducing even stricter limits on foreign currency operations. CIB slashed its ceiling on withdrawals to LE2,500 per month on Monday for most debit cards and the same amount weekly for most credit cards, with the exception of two card types that are permitted to withdraw up to LE30,000. CIB retained the same foreign currency purchasing limits it introduced in October.

HSBC, meanwhile, introduced purchasing limits ranging from LE10,000 to LE50,000 per month on all its cards for the first time and cut the US$5,000 monthly withdrawal limit it announced in October to just US$1,500.

Egypt has pursued policies to preserve liquidity as the global economic crisis brought about by Russia’s invasion of Ukraine has placed further pressure on an already brittle domestic current account. Maturing debt, heavy import dependency and high global inflation weigh heavily on the bill of due payments, while inflows have been hurt by global investors withdrawing liquidity from the domestic debt market.

The central bank has sought to limit withdrawals from the domestic banking system through a combination of customer spending limits and controls on credit availability for import transactions, while incentivizing deposits through the creation of high-interest savings certificates.

The bank also made an initial currency devaluation in October, yet the exchange value of the Egyptian pound remains partially managed and a parallel market for foreign currency has emerged. While the current rate of the pound has hovered around LE24.5 against the dollar for several weeks, according to two banking sources, the black market rate stood at LE28 in early December.

The International Monetary Fund, which signed off last week on a $3 billion, 46-month Extended Fund Facility for Egypt, said that it expects by the end of this month for the country to pursue full exchange rate flexibility and to put an end to the letters of credit system that controls how banks allocate dollars to import operations.