Why Did Egyptian Banks Regulate Spending Abroad?

Photo via Council on Foreign Relations

I am standing in front of the cashier at an electronics chain store in Dubai, with my Egyptian credit card in one hand and a new iPhone in the other. I place my credit card in the point-of-sale (POS) machine, and as I wait for the transaction to be approved so I can leave the store with my new iPhone, the words “exceeds limit” appear on the machine’s screen. I recalculate the cost of the mobile phone in Egyptian pounds, and it does not exceed my credit card limit.

I am confused.

As soon as I call the bank to understand the situation, I am told that new rules have been implemented by Egyptian banks for spending — in-person and online — and cash withdrawals abroad.

On October 5 2022, Egyptian banks announced new regulations on foreign currency withdrawals from local currency accounts. Several banks sent messages to their clients, instructing them on new monthly limits and how much foreign currency they can withdraw abroad, as well as when using their debit and credit cards out of the country.

The announcement detailed that the maximum limit set for using the card in foreign currency within 30 days is now the amount of the credit card limit.

Fortunately, Egyptian banks set different limits depending on the types of cards.

The National Bank of Egypt and Banque Misr set the maximum daily cash withdrawal limit for most cards to the equivalent of EGP 5,000 (USD 206 at time of publishing) per day, and no more than the currency equivalent to EGP 20,000 (USD 825) per month.

Uncertainty among public opinion

The announcement came as a shock to the public, and a disappointment to many Egyptians, especially those who travel often and those living abroad.

“As an Egyptian living in Dubai, I was very tempted by Egypt’s high interest rates to send money to Egypt as fixed deposit certificates,” says Fadi Aziz, a senior strategy consultant at Atkins. “The idea that my earnings are somewhat stuck in Egypt and I do not have the luxury to spend my money in a manner that suits my needs is a very demotivating factor, especially as I am not interested in moving back to Egypt in the near future.”

Similarly, Odette Ezzat, an Egyptian dermatologist who recently moved to the US, echoes Aziz’s concerns.

“We cannot get any of our Egyptian money out. So technically, we are well off in Egypt, but poor in the US,” she says.

Nevertheless, Ezzat highlights that her concern was only on a personal level, as she believes the decision is better for Egypt’s economy – an opinion Aziz does not share with her.

In August 2022, the Central Bank of Egypt (CBE) reported that Egyptian expats’ remittance inflows to Egypt in the fiscal year 2021-2022 reached USD 31.9 billion.

“This decision is short-sighted and does not take expats’ needs and requirements into consideration,” Aziz tells Egyptian Streets.

“This will definitely deter people from transferring large funds to Egypt if they feel they cannot withdraw or spend their own money as they see fit. Expat remittances will definitely decrease as a result, and remittances will be limited to necessities for a large part.”

A sudden decision: positive or negative?

Bankers and financial experts, on the other hand, applauded the timely decision, some of them describing it as a necessity during times of crisis, defending the Egyptian economy against unusual patterns of using Egyptian ATM cards abroad.

“We cannot call them restrictions actually, they are not restrictions, they are regulations for banking services abroad,” says Hany Adel, an Egyptian banking expert. “The whole world is currently in crisis, including Egypt because we have a shortage of hard currency, so we definitely need some regulation to manage resources.”

The Egyptian economy has been suffering a severe dollar shortage since the outbreak of the Russia-Ukraine war, forcing the country to impose restrictions on imports.

Describing the banks’ decision as positive and necessary, Adel stressed that the regulations vary according to the nature of each bank account and the history of the client’s transactions.

“Unfortunately, many clients used to take advantage of Egyptian bank cards since they can withdraw money abroad using them,” Adel tells Egyptian Streets. “So they would deposit huge sums of money [in Egyptian pounds] into their accounts in Egypt, then travel abroad, withdraw the money in another currency, such as US dollars, then return to Egypt and sell it in the black market.”

Black market exchange rates are exchange rates that differ from the official exchange rate set by the government. Despite being illegal, the black market is constantly flourishing in Egypt because it’s a challenge to get foreign currency from banks.

“The bank is obligated to give clients their money in the same currency that they deposited it in. As for the foreign currency, it is a service that the bank provides,” Adel continues. “The restriction is applied on the service, not on the client’s money. They are free to withdraw their money in the currency they deposited in.”

Adel explains to Egyptian Streets that this is not the first time that Egyptian banks implement these regulations, as they were implemented in late October 2016, before the currency float of the Egyptian pound in the following month.

As ‘desperate times call for desperate measures’, these attempts from Egyptian banks might be the only hope to refresh the Egyptian economy. But while my experience was only with buying a new mobile phone, I hate to think of how differently the effect of these changes may be felt in cases of emergency.

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