* Unrest in Egypt led to acute dollar shortages
* Government measures fail to crush black market
* Importers seek loopholes to keep their firms alive
* Gap between official and black rates for pound widens
* Egyptians use their credit cards to profit from gap
By Asma Alsharif
CAIRO, March 9 (Reuters) - Mohamed used to call the bank if he needed to transfer funds to China to import tyres for his Cairo business. Now it cannot give him enough foreign currency, so he has to turn to Egypt's black market despite the high costs.
Measures imposed by the government a year ago to crush the black market have had the opposite effect, pushing business owners further into the arms of illegal money changers and forcing some importers to carry large amounts of dollars in cash aboard.
While many Egyptians are simply trying to keep their firms going, the rules inadvertently also created a new generation of currency dealers who, wielding their credit cards, were exploiting a widening gap between the Egyptian pound's official and black market exchange rates.
Egypt's black market has flourished since the 2011 "Arab Spring" uprising scared off tourists and foreign investors, leading to shortages of the dollars they brought to the country's official banking system.
Trying to clamp down, the government imposed caps in February 2015 on withdrawals of foreign currency from accounts as well as on deposits - the latter to prevent illegally purchased dollars being parked in the banking system.
The central bank has since scrapped limits for individuals and importers of essential products. Restrictions remain for businesses bringing in non-essentials, such as tyres, but they are finding loopholes and say the black market is booming more than ever.
Unable to deposit more than $50,000 a month in a given bank, importers have opened accounts at multiple banks to deposit foreign currency bought on the black market. The deluge of demand from importers for black market dollars has put increasing growing downward pressure on the pound.
On Tuesday, the dollar was selling at about 9.80 pounds on the black market compared with the official rate of 7.73. It has fallen 10 percent on the black market in the last month alone.
As the crisis deepens, business owners - many of whom rejoiced when President Abdel Fattah al-Sisi took power in mid-2013, are grumbling that currency uncertainty is hurting the economy.
"We ended up with accounts in six banks," said Mohamed, whose family-owned firm sells tyres directly to vehicle owners as well as running a wholesale operation. He has abandoned a plan to expand the business in Egypt and is now looking at options abroad.
Exchange bureaux were quick to spot an opportunity. They cultivated contacts abroad who could transfer funds on behalf of clients in Egypt, charging 2.5 percent. Demand was so high, traders said, they soon raised fees to 5 percent.
Profits multiplied, in some cases more than tenfold, with a typical exchange bureau transferring at least $10 million a week, two traders involved in such transfers said.
"What are they to do? Let their business be run down to the ground or find an alternative?" said one trader.
When the caps were introduced last year, importers began splitting their invoices, paying a portion through the banks to obtain paperwork necessary to clear their cargoes at customs and transferring the rest outside the banking system.
Mohamed, who has imported goods this way, said transfers were made mostly from Gulf Arab countries.
Small importers have resorted to flying abroad with cash above the $10,000 limit allowed by authorities smuggled in luggage. "People always find another way. I took with me $15,000 in cash and travelled to Dubai to pay my supplier," said one businessman who declined to be named as the practice is illegal.
Despite mounting downward pressure, Egypt has resisted a major devaluation. It allowed a gradual 10 percent depreciation last year. But then it strengthened the pound in November, widening the gap between the official and black market rates - and luring more people to the game.
Egyptians began flying abroad, withdrawing tens of thousands of dollars or euros on credit cards at the official rate and exchanging them for pounds on the black market at a profit.
"Many people who had no business in this market... started buying and selling. Some people have made millions on this," said another currency trader who declined to be named.
The practice became so widespread that banks imposed limits last month on the use of credit cards abroad.
The central bank has also revoked the licences of four exchange companies this year.
Bankers say measures to ease the rules are not enough to curb the black market's appeal, which has sucked up hard currency from the banking system, exacerbating the shortage.
"It's not an issue of controlling the black market inside Egypt anymore," said one Egyptian banker. "It needs coordination with regulators outside Egypt, especially in Dubai and China where most such activity occurs." ($1 = 7.8300 Egyptian pounds) (Editing by Lin Noueihed and David Stamp)