Egypt’s central bank has closed 48 foreign exchange bureaus since the start of the year for trading at black market rates and other violations, banking sources said on Wednesday, as the country tries to end speculation against the Egyptian pound.
Egypt has accelerated a crackdown against black market traders it blames for growing pressure to devalue the currency. The dollar is being sold on the black market for about 12.65 to 12.75 Egyptian pounds, according to traders, far more than the official rate of 8.78, Reuters reported.
Import-dependent Egypt has struggled with a worsening shortage of foreign currency since the 2011 uprising that ended Hosni Mubarak’s 30-year rule but also scared away foreign investors and tourists—key earners of hard currency.
Egypt’s parliament on Tuesday set prison sentences of three to 10 years and fines up to 5 million pounds ($563,000) for black market currency trading.
“The number of exchange companies closed since the beginning of the year are 48, of which 26 have been closed permanently and 22 have been suspended for three months to a year,” the banking official, who spoke on condition of anonymity, said.
“The total number of foreign exchange bureaus licensed to operate in Egypt was 115 at the end of last year, but now there are only 67.”
Net foreign reserves have more than halved since 2011, to reach $15.536 billion in July, enough for less than three months of imports.
Egypt is in negotiations with the IMF for a $12 billion three-year lending program it hopes will plug a funding gap, restore market confidence and lure investment to ease the currency crunch.
The central bank has said it will not float the pound until foreign reserves reach at least $25 billion, a figure it aims to achieve by the end of the year.
Poverty Rising
Poverty in Egypt will increase throughout the year, as the government did not use the incoming foreign currency to create jobs, according to Aliaa Mamdouh, a former economist at CI Capital Investment Bank.
The current economic and social conditions in Egypt are projected to increase the poverty rate in the coming years. The government appears uninterested in controlling this at the moment. In fact, government policies have increased poverty.
Mamdouh stated that the inflation rate is higher than ever, and that Egypt’s annual growth is falling below the government’s target, which will result in a higher unemployment rate.
She believes that the poverty rate will only decrease once the government works on increasing the income of citizens and the rate of investment, which currently does not exceed 14%.
