Egypt’s central bank eases foreign-currency restrictions to clear import backlog

Egypt’s central bank has eased foreign-currency restrictions, a move aimed to clear a backlog of imports that contributed to soaring prices.

Under the changes, banks 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 Egyptian central bank’s meeting minutes were reported by several local news outlets, including the state-run Ahram Online.

The latest move seems that the main aim is to clear a backlog of imports at the ports and to shift greater responsibility on to 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 required importers to secure letters of credit from their banks to be able to purchase some goods abroad, a procedure that has been blamed for causing shortages of consumer products and getting prices higher.

Like many countries worldwide, Egypt is grappling with increasing inflation and an economic fallout of Russian war in Ukraine. The disruptions to imports have sent prices mounting.

The revised rules, announced ahead of the central bank’s monetary 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 these firms buy back and then resell the currency without taking a profit.

Among the other revisions issued by the central bank is that parent companies abroad are also permitted to provide loans to their Egyptian subsidiaries on condition that the term of the loan ranges from one to five years and that the funds are used for import operations. The import operations can also be funded through 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.