Egypt Bank Liquidity Seen Improving After Pound Devaluation

Egypt’s move to devalue its currency and eliminate restrictions on foreign-currency deposits should boost liquidity in the banking industry, according to consulting group IHS Inc.

International-currency commitments to Egyptian banks fell below 20 percent of total deposits at the end of the third quarter of 2015, from about a quarter before the restrictions were imposed in February last year, according to a report by IHS banking risk analyst Alyssa Grzelak.

Egypt, grappling with a dollar shortage, devalued its currency by about 13 percent at a local sale of greenbacks on Monday and said it would adopt a more flexible exchange rate. The central bank will use any tool to safeguard stability in its foreign-exchange market in the medium term, it said in an e-mailed statement.

Restrictions on dollar deposits were introduced to crack down on black-market trading and preserve reserves, although the measures were blamed for exacerbating a foreign-currency shortage that threatened the country’s economic recovery.

Egyptian stocks entered a bull market after the central bank’s announcement. Shares in Commercial International Bank Egypt SAE, the nation’s largest lender, have risen by about 6 percent since the government announced the changes. Egyptian Financial Group-Hermes Holding Co., the Arab world’s biggest listed investment bank, have risen 28 percent.