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C. bank cancels Forex repatriation guarantee for foreign investors

Thursday 29 November 2018 10:13 AM

Tareq Amer, Egypt's Central Bank Governor
Tareq Amer, Egypt's Central Bank Governor

Al Mal:
The central bank has decided to cancel a mechanism that guarantees that foreign investors can repatriate their hard currency earnings.

“Egypt’s risk profile improved, and its financial stability regained strength,” the central bank said in a statement. “In light of the above, the Central Bank of Egypt has decided to terminate the repatriation mechanism as of December 4th 2018, close of business day.”

When the central bank designed the mechanism, the country was suffering from an acute shortage of hard currency. Strict capital controls had all but paralyzed trade and foreign investors in Egyptian securities found they could not get their profits out of the country. For a fee, those who went through the scheme were guaranteed their money back.

After Egypt floated pound in November 2016, securing a $12 billion International Monetary Fund loan, billions of dollars worth of investments flowed into domestic government debt through the repatriation mechanism. Foreign exchange reserves recovered from near emergency levels to hit new records and the crisis receded.

The central bank raised the cost of using the mechanism about a year ago, encouraging more overseas holders of Egyptian local debt to use the interbank market -- boosting reliance on the banking sector and market forces. But the move did not translate into increased movement in the currency as analysts had predicted.