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Dealing with foreign exchange

التعامل فى النقد الاجنبى - Dealing with foreign exchange

Foreign exchange is the extent of the availability of cash in the central bank and local banks from the most popular currencies in the world, such as the Dollar, the Euro, the British pound, the Japanese yen, and other currencies. A country like as the Arab Republic of Egypt is considered as a highly dependent on importing most goods and services to a very large extent, therefore it is more commonly used and utilized in spending the foreign currencies.

The latest reports of the Central Agency for Public Mobilization and Statistics showed an increase in the value of Egyptian imports from various countries of the world to reach 94.5 Billion US dollars during the year 2022 compared to 89.2 billion US dollars during the year 2021, an increase of 5.3 billion US Dollars, meaning that Egyptian imports increase significantly, compared to Egyptian exports, which are much less than imports, and with this gap widening greatly and requiring savings the necessary and basic needs of the Egyptian country highlight whereas the importance of the so-called hard currency needed to purchase such needs.

From this standpoint, the importance of providing foreign exchange emerged, and with the emergence of the black market and foreign currency trade, it was necessary for the Egyptian country to confront this phenomenon and regulate dealing in foreign exchange within the framework of the Central Bank, local banks and exchange-currency companies.

What is the law of the central bank and the banking system?

The Egyptian legislator has issued Law No. 194 of 2020 for the regulation of the Central Bank and the Banking System. The Central Bank is an independent supervisory entity, with a public legal personality, reporting to the President, and enjoying technical, financial and administrative independence, and its opinion is taken in consideration for draft of laws and regulations related to its field of business. The Central Bank aims to ensure the safety of the monetary and banking system in addition to the price stability within the framework of the country’s general economic policy.

The Central Bank undertakes all the powers necessary to achieve its objectives, setting and implementing monetary policy, issuing securities and financial instruments in a manner commensurate with the nature of its funds and activities, and entering into open market operations.

The law of the Central Bank and the Egyptian banking system included a penalty for anyone who deals in foreign exchange outside approved banks or entities that have been licensed to do so, or who practices money transfer activity without a license, up to a fine of EGP 5 million and imprisonment for a period not exceeding 10 years, given that this issue represents great importance to the Egyptian’s economy, which is threatened with collapse due to the scarcity of hard currency represented by the US Dollar and other hard currencies.

How are the rules for dealing in foreign exchange regulated?

Banks and exchange currency companies may carry out all foreign exchange operations, including accepting deposits, dealing and transferring in and out, operating and covering the foreign currency balances they hold. Banks may export and import foreign currencies after the approval of the Central Bank. In the event that any bank of the banks violates the rules and procedures of this dealing, the Governor of the Central Bank may take whatever action and measures that deems appropriate, including stopping the violated bank from dealing in foreign exchange for a period not exceeding One year.

Banks, exchange currency companies, and entities licensed to deal in foreign exchange must submit to the Central Bank any data on the foreign exchange operations they undertake, whether carried out for their own account or for the account of others. The Central Bank monitors the implementation of foreign exchange operations in accordance with the provisions of this law and the regulations and decrees issued for its implementation thereof.

The Central Bank also regulated the dealings of every natural or juridical person that retains all the belonging foreign currency owned or possessed, and that person has the right to deal or carry out any foreign exchange operation, including transfers internally and externally. These operations are carried out through banks or through the entities licensed to do so in accordance with the provisions of this law.

Dealing within the Arab Republic of Egypt shall be in Egyptian pounds, unless otherwise stipulated in an international agreement or other law.

The Central Bank also regulated the entry of foreign currency into the country guaranteed for all those coming to the country, provided that it is disclosed in the declaration prepared for this purpose if it exceeds 10 thousand US Dollars or its equivalent in other foreign currencies.

Transferring foreign currency from the country is guaranteed for all travelers, provided that it shall not exceed Ten Thousand US Dollars or its equivalent in other foreign currencies, while upon departure all travelers are allowed to carry the remainder of the amounts previously disclosed upon arrival if it exceeds Ten Thousand US Dollars or its equivalent in currencies. Those arriving to or traveling from the country may carry Egyptian currency within the limits of the amount determined by the Board of Directors. It is prohibited to bring in Egyptian or foreign currency or transferring out through postal letters and parcels.

Crimes and penalties for dealing in foreign currency

The Egyptian legislator has stipulated, under the Central Bank and Banking System Law No. 194 of 2020, several penalties with the aim of controlling the black banking market, which would affect the Egyptian economy, and stated in Article No. 233 that the punishment shall be imprisonment for a period of no less than Three years and no more than Ten years and a fine of no less than One Million Egyptian Pounds and not exceeding Five Million Egyptian Pounds or the amount of money that is the subject of the crime, whichever is greater, anyone who deals in foreign currency exchange outside approved banks or entities licensed to do so, or practices money transfer activity without obtaining a license in accordance with the Article (209) of this law.