Egypt banks to allow transfers, limit withdrawals
Cairo, February 4, 2011
Egypt's central bank said it would would limit cash withdrawals by individuals but allow unlimited transfers abroad when banks reopen on Sunday after a week-long closure.
With no resolution in sight after 10 days of violence on the streets, bankers are bracing for chaos at bank counters and dealing rooms as alarmed investors withdraw funds from accounts and flee the Egyptian pound.
One Cairo-based trader in a bank treasury said the central bank statement would calm nerves as Egypt's financial system moves into uncharted territory.
"It will help to limit bank runs," he said. "We don't know what will happen. We don't have information. We will open to the unknown."
The Egyptian government has 21 billion Egyptian pounds ($3.6 billion) in maturing treasury bills that must be redeemed next week.
A substantial portion of the bills are held by foreign investors benefiting from high Egyptian interest rates and by banks that will not want to roll them over because they need the liquidity to meet the expected run on funds.
Deputy Governor Hisham Ramez said the central bank's $36 billion in reserves were adequate to cover withdrawals and transfers.
"There is no problem. We will be able to honour all transactions," he said by telephone on Thursday. He also dismissed concerns that the pound might weaken sharply.
"This is not true. We don't comment on currency matters, but this will not happen," he said.
Analysts have said the central bank's reserves could be severely depleted within weeks if Egypt's political stand-off is not resolved quickly.
In the two working days after the protests erupted on January 25, which was a bank holiday, Egyptians and foreign investors transferred hundreds of millions of dollars out of Egypt, currency traders estimated.
The stock exchange lost 16 percent of its value in the two days.
Analysts said several of Egypt's main sources of foreign exchange were likely to dry up in the coming weeks because of the political turmoil.
In the third quarter of 2010, Egypt each week was receiving about $280 million from tourism, $235 million from Egyptians working abroad and $120 million from foreign direct investment.
Vice President Omar Suleiman said in an interview on state television on Thursday that the country had "at least $1 billion lost in tourism in the last nine days" and that 1 million tourists had left during the turmoil.
Many workers abroad are likely to hold back on repatriating funds until they are sure the pound has stabilised, although some will still want to send funds to their families.
Only selected branches in Cairo and major provincial cities will reopen on Sunday. Operating hours will be restricted to between 10:00 am and 1:30 pm (0800-1130 GMT), the central bank's deputy governor said.
The remaining branches and currency exchange shops would reopen gradually as soon as possible.
Individuals will be limited to daily withdrawals of 50,000 Egyptian pounds and $10,000 worth of foreign currency, whatever the denomination, but would be able to transfer as much as they want from their bank accounts, locally or abroad.
When the banks do reopen, there will be no restrictions on cash withdrawals and transfers by companies and no limits on individuals or companies wanting to transfer funds, Ramez said. The interbank lending market will also reopen without restrictions.