Egypt is set to impose new rules requiring importers to use letters of credit (L/Cs) in March, despite fierce opposition from businesses.

Trade industry lobbies say the measure could inflate business costs while some reports suggest certain essential goods such as specified foodstuffs and medicine could be exempted from the new rules that aim to protect domestic businesses and preserve foreign currency.

L/C requirement

The Central Bank of Egypt (CBE) has reportedly issued a notice to banks ordering them to arrange only L/C transactions for importers. Under current rules importers can buy on cash-against-documents terms that do not require traders to tie up their bank lines of credit.

Egypt's import bill has risen significantly in recent months while the current account deficit increased to US$18.4 billion in the 2020/21 financial year from US$11.4 billion in the previous year.

Exemptions

Branches of foreign companies and their subsidiaries will be exempted from the new rules, while banks will be able to accept documentary collections for goods that were already shipped before the CBE decision was issued.

Local media meanwhile is reporting that the new rules exclude strategic and essential commodities including wheat, corn, beans, lentils, beans, chemicals and medicine.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.