The Central Bank of Egypt (CBE) announced on Thursday that it would begin the process of gradually repealing the use of letters of credit for import finance system, ensuring the completion of removal by next December.
“…, the CBE will begin the process of gradually repealing Letter No. 49 of February 13th, 2022 that mandated the use of Letters of Credit for import finance, and the CBE will ensure the completion of removal by December 2022.” the central bank said in a statement.
“This will serve as a catalyst for the rejuvenation of economic activity in the medium term.”
The letters of credit system for imports will be cancelled within two months in coordination with the Central Bank of Egypt (CBE), the Egyptian prime minister said, adding that the national strategy for the Egyptian industry will be launched within three months at maximum.
In February, the CBE issued new rules obliging all importers to use letters of credit to finance their imports, eliminating the earlier collections system that was in force for many years. It excluded foreign companies and subsidiaries from the rules.
The new rule raised objections from importers who said it would harm their supply chain and increase production costs, leading to higher inflation. They also said that the new system would take more time and put capital on hold.
