Egypt is not considering lifting its requirement on commercial goods importers to provide 100 per cent cash cover on letters of credit (L/Cs).

According to the governor of Egypt's central bank, the measure was introduced in March 1999 to protect banks from financing the purchase of goods that may not subsequently be sold. He said the measure was introduced so that importers would put up Egyptian pounds, thereby protecting banks opening foreign currency credits.

Critics of the measure say that it contributes to poor liquidity in the banking system, an argument the central bank governor refutes. He maintains the measure ensures tight control over credit and denied speculation that the measure was meant to mask liquidity problems. There is "no liquidity crisis", he said.

Egyptian banks can still open letters of credit for capital purchases and intermediate goods. The cash cover requirement applies only to commercial goods.