Egypt's move to regulate imports will allow the central bank to raise the level of unpopular dollar deposit limits 'soon', the head of the industrial federation said on Thursday, but declined to specify when. Mohamed El Sewedy, head of the Federation of Egyptian Industries, told Reuters that the trade reforms would ease the dollar shortage.
He predicted the authorities would soon increase the $50,000 a month limit on the amount of dollars a company is allowed to deposit in banks, a measure intended to deter importers from buying their dollars on the black market. Companies complain the limit has made it harder to open letters of credit. "I think they will look to release (lift) the $50,000 maximum amount ... (and) I think it will happen soon," he said without giving details.
Sewedy's influence has grown significantly as he liaises with the central bank on behalf of Egyptian companies. The new measures "will limit a large amount of goods that are entering the market and will also decrease the usage of foreign currency," Sewedy told Reuters. Egypt has imposed sweeping new controls in recent weeks that aim to plug loopholes which had long allowed some importers to dodge customs tariffs, depriving the government of revenues and making it harder for local manufacturers to compete.
The import measures, which require foreign manufacturers of certain luxury goods to register with authorities, aim to curb imports, allow local products to compete and therefore dampen demand for dollars used to import luxury goods. Egypt, which relies heavily on imports, has taken a series of measures in recent months to tackle a shortfall in hard currency needed to finance its purchases. Its trade deficit reached about $10 billion in the first quarter of the 2015-16 fiscal year, which began in July, and it has struggled to finance critical imports such as food and fuel, particularly since a 2011 uprising drove away tourists and foreign investors, key sources of hard currency.
The central bank has rationed dollars, giving priority to the import of essential goods. Export activity has been stunted by lack of dollar liquidity as manufacturers have struggled to source components and capital equipment. Total exports for the first 10 months of 2015 were down 17 percent versus the same period last year, according to data from the ministry of trade.
Sewedy predicted that recent central bank measures will help reverse this downward trend and push up industrial exports by as much as 25 percent over the next year. To help importers, the Egyptian central bank has injected dollars into domestic banks since November, including about $2 billion to close dollar overdrafts at banks.
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