Several local banks suspended or lowered foreign currency cash withdrawals and purchases made inside and outside Egypt using debit cards on October 9, following instructions from the Central Bank of Egypt (CBE) to alleviate pressure on foreign currency reserves, a source familiar with the matter explained to Business Monthly.
Banks including HSBC and the Arab African Bank have informed their clients of new measures regarding hard currency withdrawals, while the Commercial International Bank (CIB), the National Bank of Egypt (NBE), and Banque Misr have halted withdrawals in foreign currencies made abroad using debit cards altogether.
“The aim is to prevent the misuse of debit cards abroad, where individuals withdraw cash in US dollars and sell it in the local parallel market to profit from significant exchange rate differences compared to official bank rates,” the source, who requested anonymity said.
The CBE did not release a statement on this matter.
The US dollar is currently trading at approximately EGP 31 per $1 in the official market, while it approaches EGP 45 per $1 in the parallel market. This is happening amid expectations of a fourth wave of EGP devaluation against the US dollar in the coming months.
Fitch Solutions and HSBC have projected that the EGP could depreciate by over 18% and 25%, respectively, by the end of 2023.
Ahmed Moaty, CEO of the Kuwaiti financial consulting firm VI Markets, commented, “This is a normal and necessary action to address the US dollar shortage in the local market and to curb the surging EGP-dollar rates in the parallel market. It also aims to alleviate the pressure on the US dollar demand in the struggling local market.”
Moaty emphasized that debit cardholders had been using these cards irresponsibly during a challenging economic period in Egypt. He noted that this action signifies that the US dollar shortage crisis has not yet been fully resolved.
In July, the Egyptian government announced a plan to secure $191 billion through increased revenues from the Suez Canal, the tourism sector, outsourcing services in the IT sector, merchandise exports, and boosting remittances from Egyptian expatriates.
The Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva, recently stated that Egypt will deplete its reserves unless it further depreciates its local currency. Egypt is currently engaged in a $3 billion four-year loan deal program with the IMF, which has seen limited progress, with no reviews completed yet.