Annual Report on Exchange Arrangements and Exchange Restrictions 2005


International Monetary Fund. Monetary and Capital Markets Department
Published Date:
September 2005
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(Position as of January 31, 2005)

Status Under IMF Articles of Agreement
Article VIIIEffective January 2, 2005, Egypt accepted the obligations of Article VIII, Sections 2, 3, and 4.
Exchange Arrangement
CurrencyThe currency of the Arab Republic of Egypt is the Egyptian pound.
Exchange rate structureUnitary.
Managed floating with no predetermined path for the exchange rateThe value of the pound is determined freely by the banks. The Central Bank of Egypt (CBE) buys and sells foreign exchange daily at the average exchange rate set by the banks the previous day. The spread between the CBE buying and selling rates for foreign exchange is about 0.5%.
Authorized nonbank foreign exchange dealers may buy and sell domestic and foreign means of payment (banknotes and traveler’s checks) on their own accounts. These transactions are conducted in cash. However, nonbank ADs are not permitted to deal in transfers into or out of the country; they must sell all working-day foreign currency surpluses in excess of their authorized operating balances to commercial banks.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketAuthorized commercial banks are permitted to conduct forward foreign exchange transactions for their own accounts. No prior approval by the CBE is required, and the banks are free to determine the rates applied for forward transactions.
Arrangements for Payments and Receipts
Prescription of currency requirementsFor countries with which indemnity agreements concerning compensation for nationalized property are in force, certain settlements are made through special accounts in Egyptian pounds with the CBE. The balances of these accounts are minimal. Suez Canal dues are expressed in SDRs and are paid by debiting free accounts in foreign currency. Settlements with Sudan are made in accordance with the terms of the bilateral agreement.
Payments arrangements
Bilateral payments arrangements
InoperativeAn account denominated in pounds sterling has been set up to liquidate debts owed to FSU countries under terminated bilateral payments arrangements. There is an inoperative agreement with Sudan.
Regional arrangementsEgypt is a member of the COMESA.
Barter agreements and open accountsYes.
Administration of controlBanks are authorized to execute foreign exchange transactions within the framework of a general authorization without obtaining specific exchange control approval.
International security restrictions
In accordance with IMF Executive Board Decision No. 144-(52/51)Banks have been instructed to freeze accounts and assets of listed persons and organizations associated with terrorism. These measures were taken in accordance with the relevant UN Security Council resolutions. Further, the authorities have established the Financial Intelligence Unit, which coordinates all issues related to money laundering and financing of terrorism.
In accordance with UN sanctionsRestrictions exist against Libya.
Payments arrearsThere are limited technical payment arrears with certain non–Paris Club creditors.
Controls on trade in gold (coins and/or bullion)
Controls on domestic ownership and/or tradeBanks are not authorized to deal or speculate, on their own or their customers’ accounts, in precious metals.
Controls on exports and imports of banknotes
On exports
Domestic currencyTravelers may take out up to LE 5,000.
Foreign currencyAmounts exceeding the equivalent of $10,000 must be declared on exit.
On imports
Domestic currencyTravelers may bring in up to LE 5,000.
Foreign currencyAmounts exceeding the equivalent of $10,000 must be declared on entry.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyYes.
Held abroadYes.
Accounts in domestic currency held abroadn.a.
Accounts in domestic currency convertible into foreign currencyBalances may be converted through the foreign exchange market.
Nonresident Accounts
Foreign exchange accounts permitted“Free accounts” may be opened in the name of any entity. These accounts may be credited with transfers of convertible currencies from abroad and transfers from other similar accounts, foreign banknotes (convertible currencies), and interest earned on these accounts. These accounts may be debited for transfers abroad, transfers to other similar accounts, withdrawals in foreign banknotes by the owner or others, and for payments in Egypt.
Domestic currency accountsYes.
Convertible into foreign currencyYes.
Blocked accountsNo.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for importsNo.
Documentation requirements for release of foreign exchange for imports
Letters of creditMargin deposits for LCs opened by importers for trading purposes are 100%, and are payable in domestic currency.
Import licenses and other nontariff measures
Negative listMost items may be imported freely.
Import taxes and/or tariffsEffective September 7, 2004, products are classified into six (previously, seven) groups for customs purposes, with tariff rates ranging from 2% to 40%, with several exceptions. Further, import surcharges and fees were lifted (previously, surcharges at rates of 2% and 3% applied to most imports).
State import monopolyNo.
Exports and Export Proceeds
Repatriation requirementsEffective December 13, 2004, the repatriation and surrender requirements no longer apply. Previously, private and state-owned exporting companies were required to sell at least 75% of their foreign currency earnings to state-owned banks.
Financing requirementsNo.
Documentation requirementsNo.
Export licenses
Without quotasExports of raw hides are restricted.
Export taxesNo.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersNo.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsEffective December 13, 2004, the repatriation and surrender requirements no longer apply. Previously, private and state-owned exporting companies were required to sell at least 75% of their foreign currency earnings to state-owned banks; this applied retroactively to all exports since January 1, 2003.
Restrictions on use of fundsNo.
Capital Transactions
Controls on capital transactionsYes.
Controls on capital and money market instruments
On capital market securities
Sale or issue locally by nonresidentsThere are no controls on issuing securities in the country by nonresidents. Trading in securities denominated in foreign currencies must be settled in foreign currencies. The foreign exchange market may be used for transferring proceeds associated with the sale of both Egyptian securities and foreign securities.
Bonds or other debt securities
Sale or issue locally by nonresidentsApproval of the Capital Market Authority is required for issuing bonds.
Controls on derivatives and other instrumentsDerivatives do not exist in the Egyptian market.
Controls on credit operations
Commercial credits
To residents from nonresidentsNo controls are applied if the maturity of the commercial credits is one year or less and if these credits are received by the private sector. Ministries, governmental administrations, public authorities, and public sector companies are all required to register loans of more than one year with the CBE when borrowing from abroad in convertible currencies. If external loans are used to finance capital goods or projects, such a transaction falls under the state investment plan.
Controls on direct investment
Inward direct investmentThere are no general controls, but nonbank companies of foreign exchange dealers should be owned entirely by Egyptians.
Controls on liquidation of direct investmentNo.
Controls on real estate transactions
Purchase locally by nonresidentsYes.
Sale locally by nonresidentsNon-Egyptians may not sell property within five years after taking possession thereof.
Controls on personal capital transactionsNo.
Provisions specific to commercial banks and other credit institutions
Differential treatment of deposit accounts in foreign exchange
Reserve requirementsDeposits in foreign currencies held by either Egyptian or foreign nationals are subject to a 10% requirement, which must be deposited with the CBE, and are remunerated at the London interbank bid rate. The reserve ratio requirement for deposits in Egyptian pounds (excluding savings certificates with maturity of more than three years) is 14%, and these deposits are not remunerated.
Liquid asset requirementsThe requirements for assets in foreign currencies and Egyptian pounds are 25% and 20%, respectively.
Investment regulations
Abroad by banksAll banks operating in Egypt (except branches of foreign banks) are prohibited from depositing or having investment securities with a foreign bank valued at more than 40% of their capital base or 10% of their total investment abroad, whichever is lower. The total face value of the shares in these companies owned by a bank (excluding trading securities) may not exceed the value of the bank’s capital base.
In banks by nonresidentsShareholdings by residents or nonresidents in any bank in Egypt that exceed 10% of the bank’s capital require approval from the CBE Board of Directors.
Open foreign exchange position limitsThe limit for each currency (local or foreign) is 10% of Tier I and Tier II capital, and that for total long or short positions is 20% of Tier I and Tier II capital.
On resident assets and liabilitiesYes.
On nonresident assets and liabilitiesYes.
Provisions specific to institutional investors
Limits (max.) on securities issued by nonresidentsYes.
Limits (max.) on investment portfolio held abroadYes.
Limits (min.) on investment portfolio held locallyYes.
Other controls imposed by securities lawsYes.
Changes During 2004
Imports and import paymentsSeptember 7. The number of product classifications for custom purposes was reduced to six from seven. Further, import surcharges and fees were lifted.
Exports and export proceedsDecember 13. The repatriation and surrender requirements were abolished.
Proceeds from invisible transactions and current transfersDecember 13. The repatriation and surrender requirements were abolished.
Changes During 2005
Status under IMF Articles of AgreementJanuary 2. Egypt accepted the obligations of Article VIII, Sections 2, 3, and 4, of the IMF’s Articles of Agreement.

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