The CBE ordered commercial banks to prevent customers from using EGP account debit cards abroad, according to a letter from the central bank seen by Reuters on Wednesday and reportedly circulated to banks. “Please ensure that debit cards, including pre-paid cards, issued in local currency by Egyptian banks are only used within the country,” the letter reads, according to Reuters. "We sent a letter to bank chiefs today to stop the use of debit cards outside the country. As for credit cards, it is business as usual and each bank sets their own limit for their clients," an unnamed official at the central bank confirmed to the newswire. Debit cards for foreign currency accounts can still be used abroad to a limit of USD 100,000.

CBE Governor Tarek Amer denied the news on Thursday, telling state news agency MENA the rules were unchanged, but that “we need vigilance,” Reuters reported. The CBE announced on Thursday debit cards linked to EGP accounts could be used in a "regular" way, saying its instructions only apply to individuals misusing debit cards to gain “large amounts of foreign currency,” which saps banks’ foreign reserves. "Clients would use their debit cards to get massive amounts of [USD], sometimes reaching [bns], for reasons other than travel, tourism or shopping,” says Amer. He also accused some bank clients of outright fraud: “Several banks have implemented limits on payments abroad in foreign currency for their clients that have [EGP] accounts because there was massive fraud on the part of the clients.”

Amer told Al Mal implementing the restriction is non-binding to banks, but should be used as guideline. FX traders have managed to use debit cards abroad to withdraw USD 3 bn, Amer says, and one trader was arrested in Cairo Airport in possession of 70 debit cards. An anonymous CBE source echoed a similar sentiment to Al Ahram, saying the central bank has not issued any across-the-board restrictions on using debit cards abroad. He added that commercial banks have the right to set their own limits for their clients’ spending abroad using EGP accounts.

… Either way “it is a band-aid on a hemorrhaging wound,” Ian Godot writes in his blog, but there is a point behind the move (that is not based on Amer’s hyperbole). He says the “uproar” following the result is not entirely justifiable as less than 10% of Egyptians “have bank accounts, fewer have debit cards, and fewer still use those debit cards abroad.” Those who are able to travel abroad are being given a subsidy by being charged the official exchange rate while abroad. The “official” FX rate is a fictional price, Godot writes, as USD is only available domestically at around a 25% premium. This is particularly worrisome as the amount of the subsidy goes up with the credit limit on cards, which is a proxy for wealth — so the richer you are, the bigger the “subsidy” you get. Practicalities aside, Godot does not attempt to tackle the issue of freedom of capital movement or the clearly damaging and confidence-eroding impact this would have on the Egyptian economy.

… Finance writer Patrick Werr goes straight to the crux of the matter by calling for an EGP devaluation for the umpteenth time. He sees Brexit as a window of opportunity, saying if the CBE is clever, “it could seize on the moment to sharply devalue or even float the currency. If it does not, Egypt will continue lurching from one currency crisis to the next.” The problem: the EGP is being fixed to the USD, even though the Eurozone and Britain account for a much larger share of the Egypt’s foreign trade. So as the USD goes up following Brexit, the EGP will fall, putting Egypt at an even less competitive trade position internationally. Ultimately, the only question surrounding an EGP devaluation, which Werr sees as inevitable, is one of timing.