The IMF delegation that is in town to discuss a three-year, USD 12 bn facility is reportedly unhappy about the shutting down of FX bureaus and the House of Representatives’ having passed tougher jail sentences for black marketeers, “a source close to the negotiations” tells Al Masry Al Youm. The state, the IMF is said to believe, has failed to provide an alternate mechanism to supply the market with FX: “Members of the delegation felt that the government’s attitude and behavior towards exchange operators might hurt the investment climate of the country,” the source added. Meanwhile, the delegation is said to be requesting a review of upcoming legislation that could tackle the FX crisis, including amendments to the Investment Law, the Central Bank Law and changes to the tax codes. As we noted yesterday, both sides have yet to settle on a timeline for devaluation.

The delegation’s comments follows the shutdown of 48 foreign exchange bureaux since the start of the year, a banking official told Reuters, “of which 26 have been closed permanently and 22 have been suspended for three months to a year.” Yesterday, we reported that parliament has increased jail time to people convicted of manipulating the market. Moves to shut down more FX bureaux through regulatory, legislative or other changes would be a “mistake,” former chief of the Federation of Egyptian Banks said, according to Al Shorouk: It would simply drive the parallel market underground and widen the gap between the official and parallel market rates, he says. Meanwhile, the foreign exchange division of the Federation of Egyptian Chambers of Commerce is planning to hold an emergency meeting Tuesday next week to discuss the state’s moves against its members, Al Ahram reports. The meeting will also discuss House Speaker Ali Abdel Aal’s vitriolic statements that FX traders should be executed, which was picked up by the New York Times.

… Al Masry Al Youm says greenbacks were going for EGP 12.75 per USD 1 on parallel market yesterday as the EGP weakened c. 10 piasters from Tuesday.

Meanwhile, industry is also concerned about the shuttering of FX bureaus, with some insiders telling Al Borsa that the black market is crucial because “the central bank fails to provide the sector’s needs.” Ezz Steel’s Sameer Noaman claimed FX bureaux “may be breaking the law by going beyond the specified margin between the official and parallel market rate…but [no action can be taken] against firms dealing with 70% of the economy…[such measures] are have the opposite of their intended effect, heightening the pressure on factories and the market…[with bureaux shuttered], parallel market services will transition to being carried out by phone.” Added Electrostar Chairman Mohamed El Menoufy suggests the CBE should allow banks to provide FX in part at the official rate and in part at the market rate.