The Central Bank of Egypt (CBE) has issued a resolution to make it easier for importers to obtain letters of credit (L/Cs) and documentary collections that have been restricted over the past year to support government efforts to maintain foreign exchange reserves, according to prime minister Mostafa Madbouly.

Egypt's extensive use of restricting access to L/Cs and other sources of import finance for the past year or so has proved controversial, not least amongst Egyptian manufacturers and agribusinesses who say the restrictions have made it difficult for them to obtain the raw materials and spare parts they need to maintain production.

Extensive restrictions

Earlier this year Egypt issued a requirement for all import payments over US$5,000 to be made on L/Cs while government approval has also been required for import L/Cs for luxury goods.

The CBE's new resolution, which follows an announcement of the intended change by Madbouly in October, increases the value of imports exempted from the L/C requirement from US$5,000 to US$500,000.

Significant impacts

Restrictions on L/Cs have had a significant impact in some quarters. Egypt's smartphone market for example was down 73 per cent in the third quarter of this year compared with the same period last year.

This large decline is the result of a new 10 per cent import tariff that was implemented on mobile phones in November 2021, followed in February 2022 by a requirement for all import payments to be conducted via L/Cs.

Since March 2022, the government has approved only a very limited number of L/C requests for mobile phone imports as the devices are deemed to be non-essential goods.

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