Exporting to Egypt has seen significant change over the past few months, driven by The Egyptian Central Bank’s desire to monitor and control the countries current liquidity issues, said Jordan Budding, trade director at Barclays.
This has had an impact on many UK companies and has seen delays in Egyptian companies obtaining their documents to clear goods, he added.
Last December Egypt’s central bank tightened trade financing regulations to support local manufacturing and ease the ballooning trade deficit that has worsened an acute foreign exchange shortage.
In 2014, Egypt imported goods worth $60.8 billion compared with exports worth $22.1 billion.
Egypt, which depends on imports, has faced a decline in foreign currency receipts since a 2011 uprising against Hosni Mubarak scared off foreign investors and tourists. Its forex reserves have more than halved to $16.4bn, enough for just three months’ worth of imports.
“the government sees this as an opportunity to mitigate the risk of documentary manipulation by importers to reduce the duty owed. This has been a long ongoing issue that had proved difficult to tackle and came at a cost to the Egyptian government.” Budding said in an article released in TheBusinessDesk.com.
Earlier this year the central bank attempted to put a stop to the foreign exchange crisis by restricting the amount of dollars a company could deposit in banks. But the measure caused imports to pile up at ports and has been widely criticised as a blunt instrument.
As part of the regulatory change the central bank said local banks would have to obtain import documents directly from foreign banks, instead of from the clients on an open account basis, as was the current practice, he added.
Additionally the change now also requires importers to provide 100 percent cash deposits for their import letters of credit instead of the previously required 50 percent. However, medicine and food, as well as manufacturing components and machinery, are excluded from this rule around cash deposits.
The regulatory changes detailed above came in to force on January 16 and following this many UK companies have had issues in getting the documents to their counter-parties in Egypt leading to long delays of the goods being cleared through the Egyptian ports.
All exports to Egypt must now be handled on a collection or letter of credit basis with documents presented through UK and Egyptian banks as opposed to any direct/open account dealing.