US dollar shortage negatively affects banks financing import operations, lending to projects with a foreign component

Hossam Mounir
2 Min Read

The US dollar shortage has negatively affected banks’ activities that are related to financing imports and lending to projects that include a foreign component, according to Amr Tantawy, managing director of Misr Iran Development Bank (MIDB) and board member of the Federation of Egyptian Banks’ (FEB) board of directors.

Tantawy told Daily News Egypt that banks’ activities are divided between local and foreign trading transactions.

Local transactions conducted by banks in Egyptian pounds were not affected by the US dollar shortage, except for some projects that include a foreign component and require foreign exchange to buy it. This problem led to declining or suspending loans granted to these projects.

The external transactions represented in import operations were severely affected by the dollar shortage. The difference between the price of the dollar in the official and the unofficial markets has worsened the problem and led to a shortage in US dollar and foreign currency reserves at banks.

Many Egyptian banks operating in the market rely on providing foreign exchange, in order to finance import operations required by the Central Bank of Egypt (CBE). Though the CBE provides dollars specifically for this purpose in its weekly tender, it is certainly not sufficient to cover every demand, according to Tantawy.

In terms of the impact of the US dollar shortage on banks’ profits, Tantawy said that other activities carried out by banks that are not linked to foreign exchange have achieved good revenues and profits, such as investing in governmental debt tools (bills and bonds), besides the profit margin achieved through lending operations and commissions and fees on other banking services offered to its customers.

 

Share This Article
Leave a comment