Central Bank eases dollar deposit limit for importers

In a partial rollback of a policy local businesses have blamed for harming local importers and manufacturers, the Central Bank of Egypt (CBE) has eased restrictions on dollar deposits for importers of some essential commodities.

In an attempt to curb the black market, the Central Bank imposed a limit on foreign currency cash deposits of US$10,000 per day and US$50,000 per month in February.

On Tuesday, the Central Bank raised the monthly limit to US$250,000 and abolished the daily limit for importers of basic food items, industrial machinery and spare parts, raw materials and intermediate goods used in manufacturing, and medicines and vaccines.

Importers of other items, such as finished consumer goods, will still be subject to the US$10,000 daily limit and US$50,000 monthly limit, Central Bank Governer Tarek Amer said in a circular posted to the bank’s website.

Imposing a limit on cash deposits of foreign currency makes it more difficult for importers to source currency from the black market and deposit it in banks to obtain letters of credit and purchase goods from abroad.

The regulations were aimed as a blow against black market currency traders, but hit importers hard, along with local manufacturers who rely on imported equipment and materials. With Egypt suffering a currency crunch while trying to shore up the Egyptian pound’s exchange rate, the supply of dollars through formal channels was far less than the demand. Blocking businesses from depositing bags full of hard currency into their bank accounts prevented them from meeting their currency needs on the black market.

Tuesday’s Central Bank circular will ease pressure on many importers, while still leaving those who bring in goods deemed “non-essential” with few ways to legally purchase and import products.

The move is in-line with recent statements from the Central Bank and the presidency that vow to protect Egypt’s currency reserves and bolster local industry by limiting the import of non-essential goods.

The Central Bank has also recently introduced regulations tightening restrictions for importers. In December, the CBE announced it would require importers seeking letters of credit to provide a 100 percent cash deposit, rather than the 50 percent previously required. Importers are also now required to obtain documentation from banks rather than directly from clients.

The Cabinet also revised import regulations to require foreign factories that export to Egypt to register with Egyptian authorities.

Central Bank Governor Amer told Bloomberg he expects the import controls to save US$20 billion this year, but the regulations have prompted protest from importers associations.