General

According to a document circulated among Egyptian banks, the Central Bank of Egypt (CBE) relaxed the restrictions on the use of foreign exchange for international trade imports to ease the problem of overstock of goods at ports. The main changes include:

(1) A letter of credit can be opened to pay for the goods detained at the port. The importer can use the foreign exchange held in the bank account in Egypt before September 19 to pay import fees. This will allow the importer to open letters of credit (L/Cs) (documentary collection is used in some cases), make payments to overseas suppliers and release goods held at customs.

(2) The parent company with subsidiaries in Egypt can use the foreign exchange balance. The parent company can use the foreign exchange deposit held before September 19 to pay the import expenses of the subsidiary, and vice versa.

(3) Special policies for exports to neighbouring countries. Under certain conditions, importers can use the foreign exchange income from exports to neighboring countries to pay for imports. The document lists Libya, Syria, Sudan, Iraq, Yemen and Palestine.

(4) Foreign exchange can be transferred to pay for import. Importers of international trade can use foreign currency transfers from overseas partners to pay import fees. Foreign currency transfers include remittances, dividends or capital gains. Subsidiaries may use parent company loans, provided that the loan term is not less than 12 months and is recorded in the financial statements of both companies.

The above measures are aimed at eliminating the negative impact of the Bank of Egypt's previous requirement that importers use letters of credit to pay for goods, including the inability of international trade enterprises to obtain foreign exchange deposits, the accumulation of goods at ports, and the shortage of domestic industrial and consumer goods.

At present, the market has responded positively to this policy change. Alaa Ezz, secretary-general of the Federation of Egyptian Chambers of Commerce (FEDCOC), said that manufacturers can obtain raw materials and parts to increase production, and inflationary pressure will begin to weaken. Some international trade enterprises expressed their hope that the Central Bank would provide more information on how international trade importers purchase foreign exchange.