Increased volumes of letters of credit (L/Cs) are an integral part of evidence of an increase in lending by Egyptian banks in 2017 according to data released by the Central Bank of Egypt (CBE).

It announced in November 2016 that it would float the Egyptian pound and raise key interest rates as part of IMF supported reforms aimed at alleviating the US dollar shortage, curbing the black market, and stabilising the economy.

Before Egypt received $12 billion IMF support - which was conditional on Cairo introducing the reforms - L/Cs in Egypt were in very short supply.

Exchange rate liberalisation

Since Egypt liberalised its exchange rate the volume of L/Cs alongside other credit facilities granted by banks operating in the local market to their customers has increased significantly.

From July to November 2017 the volume of credit extended to businesses increased by E£14.7 billion to reach E£1.4412 trillion, according to the CBE data.

Private sector dominantCredit facilities are the sum of import L/Cs and bank guarantees as well as loans granted by banks to clients.

The CBE says that the private sector received 61.3 per cent of total credit facilities provided until the end of November 2017.

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