Sources: Banks have slowed import financing for some sectors, sparking fears of renewed dollar scarcity

Banks began over the past two weeks to slow the pace of financing for importers of various goods and products, according to ten sources who spoke to Mada Masr in recent days on condition of anonymity.

The sources said that the slowdown has raised alarm among importers, manufacturers and traders that another bout of dollar scarcity could weaken the value of the Egyptian pound.

Spanning sectors including gold, medical supplies, engineering industries and clothing, the ten sources told Mada Masr that banks now take over a week to confirm finance credit guarantees for importers — a step that previously took no more than 48 hours. Banks are still, however, providing credit as usual for imports in key sectors like food and cigarettes, the sources said.

The change has raised fears among traders and manufacturers that it might signal a potential dollar shortage, which could lead to a significant resurgence of parallel markets.

Dollar scarcity over recent years wreaked havoc in Egypt’s ports, where goods piled up as banks were unable to guarantee financing to traders. The government pumped billions of dollars into the banking system to solve the impasse after obtaining over US$40 billion in bailout deals.

But in recent weeks, global concerns of a possible economic recession have sparked panic in stock and financial markets again, prompting investors to pull billions of dollars out of Egypt’s sovereign debt market.

"We are witnessing the early signs of a crisis that could either be resolved quickly or worsen — it's impossible to predict, given the rapid pace of changes in local and global variables," said Saeed Imbaby, director of the gold trading platform iSagha.

One sign of a possible decline in the availability of foreign currency is the value of gold in Egypt’s domestic market, said Imababy, noting that it increased by LE1 over the official exchange rate last week. Gold can act as a "highly sensitive thermometer" for declining confidence in foreign exchange holdings, he continued.

A former government official, now in the private sector, told Mada Masr on condition of anonymity that traders too are now setting the exchange rate at LE52 to the dollar for payments on transactions due within a week, or at even higher rates for longer payment terms. The Egyptian pound was trading at 48.92 against the US dollar at the time of writing.

An influx of foreign currency financing from the United Arab Emirates following the landmark Ras al-Hikma deal boosted foreign exchange holdings in Egypt’s banking system earlier this year, soothing the currency black markets which had sprung up following a 2022 crisis.

Foreign investors were also tempted back to Egypt’s government debt instruments over recent months, injecting $35 billion into the economy in March and April after the Central Bank of Egypt undertook its fourth devaluation of the pound in two years. 

But billions have exited Egypt’s economy in recent weeks. The prime minister estimated in statements last week that investors pulled at least $6.4 billion out of the country since the beginning of July, or between 7 and 8 percent of the country’s “hot money” liquidity.

Inflows, however, began to dwindle in July, reaching only $900 million compared to the $4 billion the prime minister said exited the economy over the same period.