* Egypt faces widening budget and balance of payments gaps
* Move comes day after S&P downgrades Egyptian govt debt
* Banks, money changers running low on dollars
By Patrick Werr
CAIRO, Dec 25 Egypt has banned travellers from
carrying more than $10,000 in foreign currency in or out of the
country, as officials worry over pressure on its pound currency
and a rush by Egyptians to withdraw their savings from banks.
Political turmoil over the past month has raised fears among
ordinary citizens and investors that the government - which has
pushed back talks to seal IMF funding till January - may not be
able to get its fragile finances under control.
The central bank has spent more than $20 billion of its
foreign reserves to support the pound since the popular uprising
that toppled Hosni Mubarak in early 2011. It now has only $15
billion, equal to only about three months of imports cover.
The uprising drove away tourists and foreign investors
alike, freezing growth, pushing the state budget deficit into
double digits as a percentage of national output and worsening
its balance of payments.
On Monday, Standard & Poors' cut Egypt's long-term credit
rating and said another downgrade was possible if deepening
political turbulence undermined efforts to prop up the economy
and public finances.
Presidential spokesman Yasser Ali on Tuesday confirmed the
new government currency restriction, which includes U.S. dollars
or their equivalent in other foreign currencies. The decision
also forbids sending cash through the mail.
The decision prohibits all travellers from "bringing foreign
currency into the country or carrying it out to only $10,000".
Any funds over $10,000 must be transferred electronically,
Previously, travellers were simply required to declare any
amounts above $10,000 to authorities on their way in or out.
The central bank has already limited Egyptians from
transferring more than a cumulative $100,000 out of the country
since the uprising nearly two years ago unless they can
demonstrate a pressing need for the funds.
Many wealthier Egyptians have reached their limit and are no
longer able to send funds abroad.
The crisis has complicated a $4.8 billion loan the
government is seeking from the International Monetary Fund.
The IMF had been due to approve the loan on Dec. 19, but the
government asked for a delay after it cancelled a series of
unpopular austerity measures deemed essential for its approval.
Bankers said depositors had been withdrawing greater amounts
of cash from their accounts since President Mohamed Mursi issued
a constitutional declaration last month that expanded his powers
and threw the country into political crisis.
The constitutional declaration has led to occasional street
battles between supporters and opponents of Mursi.
"Since the clashes on Nov. 28 and after the announcement
that the IMF loan was delayed for a month some dollarisation
started to take place, mainly through cash transactions," said
an official at the treasury of a Cairo-based bank.
Depositors have also been spooked by an unexpected
weakening of the Egyptian pound, which the central bank
has allowed to fall by about 1 percent over the last month, he
Seeking to quell what it called these "public rumours", the
central bank on Monday said it was taking all steps needed to
safeguard deposits in Egyptian banks whether denominated in
local or foreign currencies.
Ayman Osama, father of two young children, said he withdrew
the equivalent of $16,000 from his account this week and planned
to withdraw more in the coming days.
"I have been hearing that the central bank is going to take
over all our bank deposits to pay wages for government employees
given the current deteriorating economic situation," he said. "I
am not going to put any more money in the bank and neither will
many of the people I know."
One Egyptian who wanted to buy $10,000 last week said he had
to go to many currency exchange shops before he could find
sufficient dollars because most shops had run out.
Bankers said the rush had left banks and money changers
short of dollars, but that more bank notes had been ordered from
"We are having a shortage of dollars these last few days. It
therefore may be difficult to pull out money. But the shortage
should be solved in a week," an official at one Cairo bank told
In a note published last week, EFG Hermes economist Mohamed
Abu Basha lowered his forecast for the currency to 6.60 pounds
to the U.S. dollar by the end of 2013 from an earlier forecast
of 6.40 pounds.
"An extensive delay in the IMF deal will definitely lead to
disorderly devaluation, which is likely to take the USD-EGP up
to 7.0 pounds, where dollarisation would be the crack to the
system," Abu Basha wrote.