Moody's said in a latest report Monday that the Egyptian central bank's recent measure to increase the availability of dollars to the local banks would not still be sufficient enough to ease the increasing liquidity pressures in foreign currencies that Egyptian banks face. "Although the central bank's action aims to increase the availability of dollars to the local banks, it will not be sufficient enough to ease the increasing liquidity pressures in foreign currencies that Egyptian banks face, since new dollar deposits will still be below the demanded amounts necessary to finance imports. Last Wednesday, the central bank of Egypt increased the amount of US dollars that local companies in high-priority sectors such as pharmaceuticals, food, machinery equipment and manufacturing can deposit with banks to $250,000 per month from $50,000, and removed the daily deposit limit of $10,000. "The $50,000 monthly and $10,000 daily deposit limits were introduced in February 2015 to curb the growing unofficial market for foreign exchange to which the local businesses turned when they were unable to access dollars through the banking system. As an example, an Egyptian company unable to buy dollars from a bank would buy dollars from unofficial dealers and then deposit the dollars in a bank and pay for imported goods through trade finance. By restricting the companies from depositing dollars in the banks, the central bank believed the business of unofficial dealers would shrink and force them out of business. This, in turn, would prompt their suppliers to sell their dollars to the banks instead. However, the deposit caps have been ineffective since the unofficial dealers remain in business. The demand for dollars remains significantly above the amounts available from banks. As a result, a number of Egyptian companies are not able to import, creating bottlenecks in the economy and restricting the country from achieving the five per cent GDP growth it targets for 2016. "The availability of foreign currencies has been limited since the 2011 revolution, with foreign currency reserves declining to $16.4 billion as of December 2015, which is nearly half their prerevolution level and only covers around three months of importss. In response, the central bank since 2012 has rationed dollars first to companies operating in high-priority sectors (food, pharmaceuticals, machinery and manufacturing components). The government recently took measures to streamline imports such as raising the capital requirements of companies involved in trade activities. To limit dollar outflows, the central bank introduced regulations in 2011 that limited transfers of dollars by individuals abroad to $100,000 annually and cash withdrawals to $10,000 daily. The rules allowed transfers by companies for any amount provided the transfer serves a business purpose while the daily cash withdrawal limit for companies was set at $30,000."
