The Central Bank of Egypt’s (CBE) monetary policy is a blur, according to Sherif El-Kilany, Managing Partner of Tax for Middle East at Ernst & Young LLP. El-Kilany said this policy is setting off alarm bells.
El-Kilany added that the CBE policy seeks mainly to protect foreign reserves from dropping. He said that the main advantage gained was with the policy set to limit the daily foreign deposit and withdrawals, as it helped eradicate the black market.
In February 2011, the CBE imposed restrictions on daily bank withdrawals for both Egyptian pounds and foreign currencies. The withdrawals were limited to EGP 50,000 and $10,000 worth of foreign currency. Limits on the Egyptian pound were revoked, however.
El-Kilany added, however, that this policy, along with the unstable taxation policy, has led to “collapse of the stock market”.
The monetary policies, such as the taxation rate’s reduction to 22.5% and the freezing of the capital gains tax, have not surpassed media announcements phase, El-Kilany said.
He added that the policies are provided verbally to banks, and this led to many foreign investors believing this is a procedure to limit the exit of foreign currency from Egypt.
Urging the government to clearly clarify the monetary policy, El- Kilanysaid that the government should identify the products that should not be exported and its stance on exporting products for the production process. The government should also clarify its position on foreign investments for foreign transfers that will be used in indirect investments in the stock market.
This is the second time in a month that El-Kilany has criticised the government’s taxation policies. On 9 May, the government delayed implementing its promises to reduce tax rates and apply the one-stop-shop wastes the success accomplished at the Economic Summit.
El-Kilany added the committee formed to follow-up on the implementation of the agreed-on investments should be responsible for making sure the legislations amendments.