The African Export-Import Bank (Afreximbank) has said it will arrange a facility of up to US$1 billion for the Central Bank of Egypt (CBE).

The facility could either be allocated to commercial banks to make letters of credit (L/Cs) more available or to provide the CBE with US dollars.

List of banks

If the facility is used for L/Cs, funding from Afreximbank would take the form of trade finance lines of credit to key state-owned commercial banks based on a list of import L/Cs provided by them.

According to Afreximbank, it already has a list of banks, including National Bank of Egypt that could benefit from an L/C facility. Afreximbank also expects to find more beneficiaries.

The distribution of money to the banks would be based on their requirements for liquidity, rather than allocating equal amounts to each bank.

Forex arrangements

If the facility is used to make US dollars more available, a foreign exchange swap would be arranged with the CBE under which Afreximbank would fund the central bank with US dollars in exchange for an equivalent amount of Egyptian pounds.

The US$1 billion aims to complement the efforts of the CBE to improve foreign currency liquidity.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.