Urgent measures from the Egyptian Central Bank to stop the bleeding of the dollar

The Central Bank of Egypt took a number of measures to stop the bleeding of the dollar and regulate foreign currency withdrawals from abroad.

This comes in conjunction with the Egyptian government’s efforts to provide dollar liquidity, the most recent of which was the Ministry of Finance’s announcement last Monday of collecting about $500 million from the sale of panda bonds in the Chinese market, thus making Egypt the first country in the Middle East and Africa to issue these types of bonds.

Organizing withdrawals from abroad

On Tuesday, October 17, 2023, the Central Bank of Egypt announced new procedures to regulate the process of withdrawing the dollar from outside Egypt via credit cards issued by local banks in order to prevent unjustified withdrawals of the dollar, according to what economists described.

The Central Bank of Egypt stressed its keenness to meet the needs of citizens and facilitate their use of their credit cards to cover their expenses while traveling abroad.

Stop the bleeding of the dollar

According to economists, the measures aim to stop the bleeding of the dollar after the Central Bank explained that its new decisions come after it recently monitored the misuse of these cards by some speculators by making cash withdrawals from abroad without actually traveling, and then issued instructions to banks to open and activate the maximum credit limit granted to the credit card for use in... Abroad as soon as the customer contacts the customer service center of the card-issuing bank and notifies them of his travel abroad in accordance with the regulatory procedures applied by the bank.

The Central Bank stated that until the issuing bank receives notification from the customer to activate the credit limit on the card according to the above, there will be a monthly maximum limit for using the credit card according to what each bank decides.

Incorrect use of the dollar

An official banking source explained that the Central Bank’s decision came after monitoring extensive operations carried out on credit cards of local banks from abroad for purchases in dollars, while their owners remained inside Egypt, which reveals systematic operations to wrongly exploit the dollar.

He pointed out that the process of the customer informing the bank of his travel in order to open the appropriate dollar credit for him is a procedure that was used in the past and is a precautionary measure to limit the illicit consumption of the dollar.

The decision reinforces the government's efforts to save the dollar

Economist and banker Hani Hafez said that the Central Bank’s instructions aim to preserve the dollar, especially amid the government’s efforts to provide dollar liquidity.

He added that Egypt's success in issuing panda bonds with an interest rate of 3.5%, while the interest rate in Egypt's last international bond issuance was about 11%, is considered a new strategy to avoid the accumulated burdens on the state's general budget on the one hand and to save the dollar on the other hand.

Stopping international transactions via direct debit cards

During the first week of this month, major Egyptian banks sent text messages to their customers informing them to stop dealing in foreign currencies via direct debit cards while continuing to use them inside Egypt for purchases and cash withdrawals. This step came based on directives from the Central Bank of Egypt to banks operating in the country as one of its steps. To maintain dollar liquidity.

The Egyptian economic and banking expert, Ezz El-Din Hassanein, said that the misuse of this type of card to smuggle dollars out of the Egyptian banking system is the main reason for the decision.

Hassanein added that dollar withdrawals are considered a drain on the US currency through credit cards, at a time when the Central Bank aims to save the dollar.