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Egypt’s central bank eased foreign-currency restrictions in an attempt to clear a backlog of imports that’s contributed to soaring prices.
Under the changes, lenders can now use balances of foreign currency held in company accounts before September 19 to open new letters of credit or inward documentary credits. The revisions in the central bank’s meeting minutes were reported by several local news outlets, including the state-run Ahram Gate website and Al-Mal’s online edition.
Officials with the central bank didn’t respond to calls seeking comment.
The latest step likely means that the main aim is to clear a backlog of imports at the ports. It also aims to shift greater responsibility onto the banks to verify sources of the funds and handle other issues that previously had to be vetted through the central bank.
Earlier this year, authorities began to require importers to secure letters of credit from their banks to be able to buy some goods abroad, a procedure that’s been blamed for causing shortages of consumer products and driving up prices.
Egypt is grappling with rising inflation and the broader economic fallout of Russia’s invasion of Ukraine. Disruptions to imports have sent prices soaring, squeezing a population already struggling to recover from the fallout of the coronavirus pandemic.
The revised rules, announced ahead of the central bank’s policy meeting on September 22, also said parent companies of Egyptian subsidiaries can use foreign currency held in their accounts in local banks to carry out import operations. The change applies on condition that they buy back and then resell the currency without taking a profit.
The latest revisions come after officials said they were working to ease import restrictions.
Looking to help bridge a funding gap, authorities are also working on securing assistance from the International Monetary Fund, and have said they are hopeful of an agreement soon.
Cairo has also secured more than $20 billion in aid, funding and investments from oil-rich Gulf states, and are planning on offering more state-held companies to investors in a bid to bolster the private sector and generate additional revenue.
Such assistance is critical for Egypt, a country of roughly 100 million that’s one of the world’s biggest wheat buyers.
Among the other revisions issued by the central bank:
Parent companies abroad are also allowed to provide loans to their Egyptian subsidiaries, provided that the term of the loan ranges from one to five years and that the funds are used for import operations
Import operations can also be funded via currency transfers from abroad or by funds resulting from dividends paid abroad or company capital increases
Imports can also be secured using collection documents if the exporter has received the amount due in full, with the cutoff being September 19
