Egyptian banks limit card transactions due to currency shortage

According to the agency Reuters, at least two major banks in Egypt – Arab African International Bank and Arab International Bank – have restricted the use of debit cards outside the country. Agency sources note that this was done due to a shortage of foreign currency in the country, as well as a significant discrepancy between the official exchange rate of the Egyptian pound and the dollar from the real one. The official rate is about 31 Egyptian pounds per dollar, but on the black market for $1 they give 40-41 pounds. Egyptian authorities have fixed the exchange rate since March, despite the growing difference between the official and real rates.

Against this backdrop, there are increasing reports that Egyptians are using cards in local currency to purchase goods in foreign stores at the official, lower rate. Trips to the UAE have also become popular, where Egyptians buy gold, jewelry, other luxury goods, electronics, etc. both for their own use and for resale at home, but in accordance with the real dollar exchange rate. Thus, Egyptian banks are experiencing a significant outflow of foreign currency at an unfavorable rate. A Reuters source in local banking circles does not rule out that other banks in the country are planning to introduce similar restrictions in the near future.

Growing currency problems in Egypt led to Moody’s yesterday reduced The country’s sovereign credit rating, which is already below investment grade, is raised one more notch – from Ba3 to Caa1. The agency explained its decision “by the deteriorating situation around Egypt’s public debt and the persistent shortage of foreign currency, which is necessary to service the debt.”

Evgeny Khvostik