Tuesday, January 1, 2013

Egypt Imposes New Cash Controls At Border

By Jon Matonis
Forbes
Thursday, December 27, 2012

http://www.forbes.com/sites/jonmatonis/2012/12/27/egypt-imposes-new-cash-controls-at-border/

Currency controls are now in place and there is a ban on traveling with more than $10,000 in cash. Egyptian officials are becoming worried as savings account withdrawals increase in the face of a depreciating pound and public rumors of central bank confiscation of deposits.

On Tuesday, Presidential spokesperson Yasser Ali confirmed the government's decision which limits all travelers from "bringing foreign currency into the country or carrying it out to only $10,000." Ali added that "any funds over US$10,000 must be transferred electronically" and the decision also forbids sending cash through the mail.

Previously under the original law, any amounts above $10,000 or their equivalent in foreign currencies simply had to be declared to authorities.

With foreign investors and tourists holding back now, the post-revolutionary Egyptian government of Mohamed Morsi is finding it difficult to maintain control over its finances and budget deficit. As a result, Egyptian officials have delayed the high-level talks that are necessary to secure a $4.8 billion loan from the International Monetary Fund (IMF).

New thinking at the International Monetary Fund now accepts that capital controls are sometimes necessary to prevent destabilizing capital flows. It is not clear from the IMF Survey if this new view would apply to the control of outflows from Egypt which has seen its foreign currency reserves fall from $36 billion in 2010 to $15 billion today dangerously close to the IMF's recommended coverage of three month's of imports. Estimates put hard currency reserves at just about $4 billion.

After visiting one exchange office that had run out of dollars, Cairo resident Mahmoud Kamel said, "I want to exchange money because I'm afraid the Egyptian pound will not have any value soon."

Furthermore, due to the cumulative limit of $100,000 in effect from nearly two years ago, many wealthier Egyptians have maxed out and are unable to send money abroad.

The Central Bank of Egypt said Tuesday that the Egyptian pound was trading at 6.20 per U.S. dollar compared to 6.00 during the first half of the year. Without necessary currency reserves to fund imports, it is likely that the pound will fall in value sharply.

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