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Sunday, 3 December 2017

CBE sets 1% entrance fee on FX investments through foreign repatriation mechanism

CBE sets 1% entrance fee on foreign currency portfolio investments through repatriation mechanism: The Central Bank of Egypt announced that a 1% “entrance fee” will be put in place for fresh foreign currency portfolio investments that enter via the repatriation mechanism starting from today. “The application of the entrance fee comes one year post the liberalization of the foreign exchange regime, at a time when the market has gained depth and momentum,” the CBE said in a statement on Wednesday (pdf). The CBE will retain the 0.5% exit fee on the repatriation system.

Balances held prior to today (3 December) will not be affected. The central bank’s statement (linked above) explains in detail the entry and exit procedures.

Is the CBE looking to phase out the foreign repatriation mechanism? BNP Paribas’ Youssef Bishai tells Al Borsa that the move is meant to drive FCY portfolio investment from foreign investors over to the interbank system and discourage the use of the foreign repatriation mechanism. Beltone analyst Aliaa Mamdouh says the ultimate goal is to phase out restrictions on repatriating profits that had been put in place during the heights of the FX crunch. The move could also mean that the CBE is bringing its repatriation policy in line with the IMF, which in one of its few criticisms of the CBE, called for repatriation restrictions to be removed. As FX reserves continue to rise to their pre-2011 levels, the CBE has been phasing out FX restrictions. Most recently, the CBE lifted all previously-imposed restrictions on USD deposits and withdrawals for importers of non-essential goods last week.

Meanwhile, the CBE announced on Wednesday that Egypt’s M2 money supply was up 40.48% y-o-y in October from a year earlier to EGP 3.09 tn (USD 173.91 bn), Reuters reports.

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