The decision taken by the Central Bank of Egypt (CBE) on 5 February to impose a limit on dollar deposits has resulted in losses for most Egyptian importers. The move restricts the supply of US dollars in banks, making it harder for importers to find the cash they need to pay their overseas debts. The measure is aimed at preventing speculators from hoarding dollars in the form of deposits. Individuals and companies are now permitted to deposit a maximum daily amount of $10,000, and not more than $50,000 a month. Limiting dollar deposits in the banks is part of a series of measures taken by the CBE to control the black market in currencies. The CBE has also allowed the Egyptian pound to depreciate to LE7.63 against the dollar, down from LE7.15 early last month, in order to close the gap between the official price and the dollar's value on the black market, which earlier climbed above LE8. The CBE has several times said it will cover importers' dollar needs, a promise it has so far failed to honour, according to Ahmed Sheiha, head of the importers division at the Cairo Chamber of Commerce. Import deals have slowed since the CBE put the limit on dollar deposits, Sheiha said, adding that the decision is causing problems for more than 80,000 importers. What has made things worse is that the decision was applied without consultation or coordination with importers, and without giving them time to prepare for the move's repercussions, he said. Sheiha expects a rise in the price of many goods in the local market within a short period, especially food commodities, which are mostly imported. “The lack of availability of dollars might lead to the cancellation of many import deals, and several commodities might become scarce in the Egyptian market,” he said. Cargoes are currently blocked in Egyptian ports because importers are unable to pay for their shipments. Many foreign partners or agents are demanding that Egyptian importers pay before the shipments are unloaded, Sheiha added. Importers pay a daily fine of $100 to $200 for each container waiting in the ports. As a result of the dollar shortage, Sheiha expects a sharp decline in the revenues of importers. One of the main commodities that has already witnessed a price rise since the CBE decision is steel. Steel prices in the local market have jumped by LE50 to LE100 per ton on last month's prices. This is because approximately 85 per cent of the raw materials, such as billets, used in manufacturing steel are imported. Steel prices currently vary from LE4,500 to LE4,900 per ton, depending on the company. “Failing to pay for imported raw materials on time might also affect Egypt's reputation among international suppliers,” said Mohamed Hanafi, general manager of the Chamber of Metallurgical Industries at the Federation of Egyptian Industries. Hanafi is worried that some steel factories might stop working because of the lack of raw materials. “The banks must supply importers with the dollars they need in order for them to secure supplies of raw materials,” he said. Hanafi said that the $10,000 limit on deposits covers the cost of only about five tons of billets, far less than what is needed by local industry. Despite its success in curtailing the currency black market, Sheiha believes that the CBE must intervene to find a solution, so that Egyptian banks can cover all import dollar demands. “Otherwise, the prices of many commodities in the local market will keep on rising,” he said. The CBE recently increased the number of dollar auctions from three to four per week, in order to increase the weekly supply of the US currency from $120 million to $160 million. But the move does not cover all import demands.
