Cairo - Egypt's removal of foreign currency transfer limits will help restore confidence in the economy and attract more foreign investments, according to a recent report by Fitch Ratings. This will also help in increasing the availability of foreign exchange and helping banks provide more lending needed by foreign currency borrowers, particularly importers, the report indicated. "We expect a greater inflow from foreign investors now that the Central Bank of Egypt (CBE) has ended the $100,000 annual cap on the amount that account holders can transfer outside Egypt." "The removal of the cap last month, a requirement of Egypt's lending programme with the International Monetary Fund, should reduce foreign investors' concerns that investments could be trapped in Egypt," the report stated. The restrictions were put in place in 2011 to limit capital outflows after the political uprising, but the political and macroeconomic backdrop has since become more stable, reducing the risk of outflows, the rating agency explained. Under the flexible exchange rate regime in place since Egypt's currency flotation in November 2016, banks have better access to foreign currency liquidity through the interbank market and depositors swapping their foreign currency deposits into higher-yielding local-currency deposits or certificates of deposit. The CBE previously used foreign currency auctions to preserve the exchange rate, which restricted the liquidity of foreign currency. There are already signs of an improvement in banks' foreign currency positions following the sharp depreciation of the Egyptian pound after the currency flotation and Egypt's $4 billion Eurobond issuance in January 2017. The Egyptian banking sector loans per deposits ratio fell by 3.7% in the first quarter of 2017, having risen to more than 66% in 2016.
