Restricting withdrawals and deposits in Egypt's banks ... to reduce the epidemic or to prevent hoarding?

Doaa Abdel Latif - Cairo

The Central Bank of Egypt’s decision to set a temporary daily limit for withdrawing and depositing cash in banks and ATM branches raised concerns about the consequences of the decision and questions about its hidden motive, in light of concerns about large withdrawals made over the past weeks.

The Central Bank of Egypt, in a statement issued yesterday, Sunday, restricted the daily limit for deposits and cash withdrawals at bank branches to become ten thousand pounds ($ 637) for individuals and 50 thousand for companies ($ 3200). As for the daily limit of banking operations from ATMs, it set it at five thousand pounds.

Despite the central affirmation that the decision stems from the desire to reduce dealing in securities to prevent the spread of the new Corona virus, the governor of the Central Bank, Tariq Amer, announced on the eve of the decision that the Egyptians had withdrawn 30 billion pounds from the banks within 3 weeks without a real need for them.

Also, Mohamed Al-Atribi, head of Banque Misr, head of the Federation of Egyptian Banks, confirmed the monitoring of large withdrawals by citizens during the past few days.

He added in a press statement that the circulation of cash between citizens may transmit the infection, pointing to the large crowding of citizens with banks, which contributes to the spread of the epidemic.

The statements of the Governor of the Central Bank and the President of the Banks Union seem suspicious to observers about the real purpose of the decision to restrict withdrawals and deposits, and to ask whether the government aims to prevent citizens from withdrawing their bank savings for fear of a counter scenario that leads to the collapse of the banking sector.

Exception of deposit
It did not take hours for the Central Bank to announce the restriction of withdrawals and deposits until it was permitted, with the exception of some entities, individuals and transactions from the deposit ceiling decision.

The exception includes government deposits "electricity, gas, water and oil", and they are accepted without a ceiling with the necessity to adhere to the daily cash exchange limit, in addition to accepting corporate deposits "public or private sector" without maximum limits.

Customers were also allowed to pay credit card dues without maximum limits, and any obligations such as letters of credit and letters of guarantee.

The central bank has set a condition for accepting checks submitted for clearing without any maximum limits, in the event that any check presented on the counter exceeds the amount of 10 thousand pounds, 10 thousand pounds are spent in cash, and the rest is either to open an account for the customer or transfer the rest of the amount to his account in another bank without commission, or The exchange of the check is divided into several days.

It is noteworthy that the National Bank of Egypt and Egypt - which are two government banks - recently launched new savings certificates with a return of 15%, which raises questions about how customers can buy new certificates in light of restricting withdrawals and deposits, and also generates expectations of the government’s desire to reduce withdrawals from deposits of interest Low.

The central bank had cut interest by 3% in the middle of this month to the level of 9.25% for deposit, and 10.25% for lending, after it stood at 12.25% and 13.25%.

The decision to cut interest prompted Al-Ahly and Egypt banks to introduce new savings certificates at a high interest rate.

Precaution procedure
For his part, journalist specializing in economic affairs, Mustafa Abdel Salam, supported placing restrictions on withdrawals and deposits, considering that it - that is, the decision - contributes to reducing the currency in circulation in the hands of citizens, which limits the spread of the virus.

He explained via a post on the social networking site Facebook that many countries imposed such restrictions after the outbreak of the virus in the context of precautionary measures by the state.

Abdel Salam described the Central Bank’s decisions as temporary restrictions related to addressing the atmosphere of concern about the effects of corona on the Egyptian economy, expected to be canceled after the virus recedes.

The economic journalist saw other advantages of the decision to combat financial crimes, the most prominent of which are "money laundering operations that are active as society passes through political, economic or health concerns by reducing" cache "in the markets."

However, he did not rule out that one of the reasons that prompted the central bank to expedite the issuance of this decision was his fear of the return of some to speculation in the dollar with the increase in its price in the recent period, which led to restrictions on withdrawals.

Abdel Salam warned of the banking sector's exposure to any risks, and considered it the most important within any country, adding, "If it is exposed to any risks, the economy may collapse completely."

For his part, the economist, Dr. Abdul Nabi Abdul Muttalib, said that the decision is actually due to the fear of the Corona virus, referring to his opinion to restrict both clouds and creativity.

The risk of compactness
At the same time, Abdel-Muttalib considered, in his talk to Al-Jazeera Net, under deposit and withdrawal, one of the most important decisions that contribute to keeping money movement within the banking system, adding that it protects the Egyptian economy from the risk of hoarding.

He explained that people in times of danger, epidemics and wars prefer to keep money in their coffers, and lose confidence in banks for fear of bankruptcy.

However, the economist stressed the need to provide a comprehensive electronic payment system that ensures settlement of payments and access to goods and services through electronic payment or payment via the Internet.

And on whether there is a government fear that customers withdraw their deposits and transfer them from pounds to dollars, Abdel-Muttalib said that this is a possibility, but he found in certificates with a return of 15% a way to reduce the process of "dollarization", pointing at the same time to fear of potential losses as a result Break the deposit.

However, professor of economics at the University of Oakland, Dr. Mustafa Shaheen, considered the use of concerns about the spread of the Corona virus to pass the decision of withdrawing and depositing an outright deception of customers by the central bank.

Shaheen told Al-Jazeera Net that the restriction of withdrawals and deposits has nothing to do with the risks of transmission and the spread of the Corona virus, explaining that there is a government fear of a repeat of the scenario of 1929 when banks collapsed because customers were withdrawing their deposits in anticipation of bankruptcy.

He added that citizens are concerned about their money in banks, pointing at the same time to the correctness of the central bank’s decision to keep the banking sector from collapsing in the event of extensive withdrawals within a short period.

But what defects government action - according to the opinion of the economist - is the lack of reassurance of people by dealing transparently without deception, stressing the need for government officials to announce the true reasons for their decision, which will be understood by the client, who is in his interest not to collapse the banking sector.