Egypt's central bank cracks down on exchange bureaus as black market surges

Egypt's central bank began cracking down on exchange bureaus who have been selling currency at unofficial rates as a black market for dollars surged amid a currency crisis and speculation of a devaluation. Egypt, which relies heavily on imports, has been facing a foreign currency shortage since a 2011 uprising drove away tourists and investors - major sources of hard currency.
The country's reserves tumbled from about $36 billion in 2011 to $16.48 billion in January as the central bank kept the exchange rate artificially strong at 7.7301 pounds per dollar. The black market rate hovered over 9 pounds per dollar this week, up from around 8.8 pounds last Thursday. Egypt's central bank closed down four exchange companies, with a total of 27 bureaus across Egypt, over the past two days for violations including selling foreign currency at unofficial rates, sources in exchange bureaus told Reuters on Wednesday.
There are 111 exchange bureaus operating in Egypt according to central bank data. "The information we have is that there is a list of 10 companies that the central bank intends to close completely. Four of them were closed now due to violations in pricing of currencies, among other violations," one exchange bureau source said. Late last month the central bank met with the biggest exchange bureaus in an effort to keep a lid on black market rates by allowing exchange bureaus to sell dollars within a specific range above official prices.
The central bank does not have a spokesperson and officials were not immediately available for comment. Sources dealing with the black market told Reuters that, according to the agreement, the central bank would allow them to sell dollars up to 8.6 pounds per dollar but if they exceeded that amount they could be shut down and their license revoked. Former central bank governor Hisham Ramez, who stepped down late last year, had fought the black market head on, talking publicly about crushing it and shutting down dozens of exchange bureaus selling at unofficial rates. Tarek Amer, who took over from Ramez in November, was described by bankers and exchange traders as trying to work with exchange bureaus to control the market, but the recent closures could indicate a change in approach.