Letters of credit (L/Cs) in Egypt have become harder to come by as a result of the government's attempts to curb black market foreign exchange deals.

Egypt's currency market reforms are having a particularly negative impact on private sector wheat traders who are struggling to secure shipments.

Currency devaluations

In February, the central bank devalued the Egyptian pound and capped bank dollar deposits at U$50,000 to curb the black currency market, but this has blocked a well-used method of obtaining L/Cs for wheat imports.

"Firms can no longer buy dollars on the black market and then place them in banks to open up L/Cs for import," according to Middle East economist at Capital Economics, Jason Tuvey.

No compensation

The restrictions on unofficial US dollar flows have not been compensated by increased hard currency availability through official routes.

The result is that the world's largest wheat importer is now grappling with a country-wide hard currency shortage.

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