Egypt’s central bank has imposed new restrictions on using credit cards for transactions in foreign currencies, both within the country and abroad, to curb the outflow of hard currency and protect its dwindling foreign reserves.
The move comes a week after the central bank banned the use of Egyptian pound debit cards for overseas purchases, citing cases of speculators abusing these cards to withdraw cash from foreign ATMs without actual travel.
According to the new directives, credit card transactions in foreign currencies will be limited to $250 per month within Egypt and require prior notification to the bank for international travel. Reuters reported that the banks are also instructed to set and activate the highest credit limit for these transactions.
Egypt has been facing a severe shortage of foreign currency since 2021, when the COVID-19 pandemic hit its tourism sector, one of its main sources of income. The country has maintained a fixed exchange rate of about 31 pounds to the dollar since March 2021, despite a growing gap with the black market rate of around 40 or 41 pounds to the dollar.
The central bank’s efforts to preserve its foreign reserves, which stood at $38.2 billion in September 2023, down from $45.5 billion in February 2021, have been met with criticism from some economists and business owners, who argue that the restrictions will hurt the economy and discourage foreign investment.
A senior banker told Reuters that 70% of credit card usage in Egypt was for online shopping from abroad, which he said was “a luxury we can’t afford right now.”
However, some analysts believe the central bank’s measures are temporary and will be lifted once the economy recovers from the impact of the pandemic. They also point out that Egypt has other sources of foreign currency, such as remittances from expatriates, gas exports, and loans from international institutions.
Egypt is expected to receive $1.6 billion from the International Monetary Fund (IMF) by the end of 2023 as part of a $5.2 billion financing agreement signed in June 2021. The IMF praised Egypt’s economic performance and reforms in its latest review in September 2023.
Egypt also hopes to boost its tourism sector by hosting the Africa Cup of Nations in January 2024, which could attract millions of visitors and generate revenue for the country.
Source: Business Insider Africa
