Exchange controls are tightening: The Central Bank of Egypt (CBE) has asked (pdf) banks to impose limits on the use of credit cards for foreign-currency transactions at home and abroad, a week after introducing curbs on debit cards in response to the country’s FX shortage.

The limit: Credit card holders will only be allowed to make USD 250 a month in local FX transactions, according to Asharq Business, which spoke to nine banking sources. Reuters also reported the same figure, citing three bankers. The central bank did not disclose a limit on locally executed FX transactions.

This is very bad news for startups as well as small and medium sized businesses, whose technology expenses for critical infrastructure typically run on credit cards. Businesses rely on vendors including Microsoft, Google, Amazon and dozens more for cloud storage and compute, email, chat, core productivity applications (think: Google Sheets and Microsoft Excel), password management, and more. We hope bankers will be sensible in allowing business clients of all sizes to demonstrate “legitimate” needs for much higher limits.

Want to spend more? You have to be abroad — and you have to be able to prove it: Customers will have to contact their banks and notify them of their travel plans before being given access to their usual FX transaction limits, the CBE said. Each bank will be left to determine how they will prove travel, one source told Asharq.

We’re curbing “misuse,” says CBE: Customers are misusing credit cards by making FX-denominated payments or withdrawals from abroad without leaving the country, the central bank said.

It’s about stopping the FX drain: The head of a private local bank told Asharq that the decision was due to “the scarcity of foreign currency in Egypt, and therefore we must all rationalize its consumption for what the country needs most.”

The news follows bans on debit cards last week: Several of the country's biggest banks last week began blocking the use of local-currency debit cards abroad.

Remember: Egypt’s FX situation isn’t in a good place. FX liquidity in the banking system has continued to deteriorate this year, with net foreign liabilities among commercial banks widening to USD 16.5 bn in August.

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