Next week, Egypt will end a mechanism guaranteeing overseas investors can repatriate their foreign currency, the latest indication that the central bank believes an economic reform programme is on a firm footing.
The mechanism “was heavily utilised by foreign investors” as the overhaul began, the central bank said in a statement. But as the plan centred on a 2016 devaluation of the pound delivered gains “and the foreign-exchange resources granted by the real economy flourished, Egypt’s external balances and various economic indicators have gained considerable strength,” it said.
The mechanism will be ended on December 4.
Egypt’s International Monetary Fund-backed programme aims to boost growth, cut spending and encourage foreign investment. The repatriation mechanism had been a key part of the effort, providing up until then wary investors of a process through which they were assured the ability to withdraw their foreign currency.
The central bank had indicated before that it wanted to end the mechanism and push more of the transactions through the interbank market — boosting reliance on the banking sector. The decision to proceed comes at a time when foreign holdings in Egyptian debt have been dropping, reaching around $11.7 billion (Dh43 billion) in October from $13.1 billion the month before.
After the December 4 cut-off, any additional investments in local T-bills, bonds or stocks listed on the Egyptian exchange will have to go through the interbank market, the regulator said. The decision, however, doesn’t affect balances held in the repatriation mechanism.