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Thursday, December 27, 2012
Dollar panic besets Egypt amid devaluation fears

Dollar panic besets Egypt amid devaluation fears
Ongoing rumours about a devaluation of the pound and future economic
turbulence lead to brisk trade at banks as Egyptians withdraw and convert
deposits
Bassem Abo Alabass, Thursday 27 Dec 2012

http://english.ahram.org.eg/NewsContent/3/12/61339/Business/Economy/Dollar-panic-besets-Egypt-amid-devaluation-fears.aspx

Egypt is being hit by a dollar shortage as some Egyptians rush to convert
their local savings into foreign currencies amid signs of further economic
turmoil ahead.

Foreign exchange bureaus have seen heavy trade for the last two days with
the Egyptian pound falling to 6.18 to the dollar on Thursday, its lowest
level in eight years.

An anonymous source in the leading money transfer company Western Union told
Ahram Online Wednesday that they had to put specific restrictions on dollars
transfers into Egypt due to heavy demand from customers in the last two
days.

Western Union denied Wednesday evening a suspension of US dollar transfers,
confirming that its work will continue normally.

Banks, too, have experienced brisk trade as some citizens withdrew their
savings. According to Beltone Financial, the Egyptian investment bank, on
Thursday Shahinaz Foda, deputy managing director of BNP Paribas, said the
problem is a banknote shortage rather than a liquidity crisis.

“Our clients think that the bank is going to freeze their deposits, so many
of them have applied to withdraw their monies and convert them into
dollars,” explained an HSBC manager who requested anonymity.

This followed rumours that the governor of the Egyptian Central Bank was set
to resign due to the state of the economy and the possibility of floating
the currency.

Govenor Farouq El-Oqda on Sunday denied TV reports that he was set to step
down.

Foreign exchange specialists contacted by Ahram Online gave a mixed picture
of the alleged dollar crisis.

A representative from the Arab African International Bank described the
situation as "so far stable," saying its customers are still able to buy any
amount of dollars they wish.

But Mohamed Mostafa, the owner of a currency exchange shop, said that his
three offices are seeking dollars and Euros because of fears among Egyptians
of a coming devaluation of the pound.

On Tuesday, President Mohamed Morsi modified banking regulations in order to
tighten foreign currency transfers from and to Egypt. Travelers to and from
Egypt will not be allowed to carry more than $10,000 or its equivalent.

“This decision was supposed to be issued immediately in the wake of the last
year’s uprising, so then we would not witness this big fall in our foreign
reserves and this current stance in the market,” Mostafa told Ahram Online.

The spokesperson of the Egyptian Cabinet, Alaa El-Hadidi, stated Wednesday
that challenges and risks constrain the forward steps of the country’s
economy.

He added that the government is trying to resume talks on a suspended $4.8
billion loan from the International Monetary Fund, in order to boost the
financial situation.

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