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Egypt's central bank holds second meeting with exchange bureaus to cap black market rates
March 9, 2016 / 9:49 AM / 2 years ago

Egypt's central bank holds second meeting with exchange bureaus to cap black market rates

CAIRO, March 9 (Reuters) - Egypt’s central bank held a second meeting with foreign exchange bureaus in an attempt to keep black market rates under control as Egypt’s currency crisis worsens and the rate of the dollar surges against the pound on the parallel market.

Egypt, which relies heavily on imports, has been facing a shortage of foreign currency since a 2011 uprising drove away tourists and investors, two major sources of hard currency.

The central bank has been resisting a devaluation, keeping the pound artificially strong at 7.7301 against the dollar while on the black market it jumped above 9.8 pounds per dollar this week.

Officially the central bank allows exchange bureaus to sell dollars at up to 15 piasters either side of its set price, but the bureaus have been known to demand more for the greenback when it is in short supply.

“Yes, there was a meeting with the central bank,” said Mohamed El-Abyad, head of Egypt’s Foreign Exchange Association.

Two exchange bureau sources told Reuters that during the meeting there was an agreement to put a limit on the price of the dollar on the black market.

“The agreement was not to exceed the 9.25 pounds to the dollar price on the parallel market in return for the central bank not interfering with exchange bureaus,” one exchange bureau source, who attended the meeting, said.

Last month the central bank revoked the license of four exchange bureaus after a similar meeting, in which an agreement to cap the price of the dollar at 8.6 pounds failed to keep rates within the limit.

Abyad, who also attended the meeting, denied that there was an agreement on a cap for the dollar price on the parallel market.

The central bank does not have an official spokesperson and officials were not reachable for comment.

Bankers and exchange traders said the plan was unlikely to succeed as the black market is guided by supply and demand.

Egypt’s foreign currency reserves tumbled from $36 billion in 2011 to $16.5 billion by the end of February.

In an attempt to increase liquidity in the market the central bank has been trying to attract hard currency from Egyptians abroad.

Last month it announced it would issue dollar denominated certificates through state banks to Egyptians living abroad. On Tuesday the central bank lifted caps on deposits and withdrawals for individuals.

Central bank governor Tarek Amer said he hoped the move would contribute to increasing Egypt’s foreign reserves over the current period. (Reporting by Ehab Farouk; Writing by Asma Alsharif; Editing by Toby Chopra)

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