Back to the complete issue
Wednesday, 16 February 2022

CBE holding the line on new import rules

The Central Bank of Egypt (CBE) is not about to reverse its decision requiring importers to get letters of credit (L/Cs) for their purchases, CBE Governor Tarek Amer told the state-owned Middle East News Agency yesterday. Amer urged businesses to comply with the new requirements and “not waste time in controversy that has nothing to do with the stability and sound performance of Egypt's foreign trade.”

That’s not what importers wanted to hear: Heads of several industry groups have called on the government to reverse the decision, which the CBE notified banks of over the weekend. They argue that the move would cause supply issues, pressure production costs and local prices, and freeze SMEs out of the industry because it would be harder for them to obtain L/Cs.

What decision? And what are L/Cs? Documentary collection from exporters will no longer be accepted by banks to facilitate the import of goods into Egypt from the beginning of March, according to a decision by CBE taken over the weekend. Instead, the CBE has instructed banks to only accept LCs to facilitate the purchase of imports. L/Cs guarantee exporters that the bank will pay them if the importer defaults for whatever reason, offering exporters more protection.

The flip side is that L/Cs tend to tie up capital, with many importers seeing the banks freezing the value of the facility in the importer’s accounts for so long as the L/C is open. Dealing with L/Cs is also sufficiently complicated that some SME-sized importers may not have the institutional capacity to do so.

Exempt from the decision: Branches of foreign companies and their subsidiaries do not have to abide by the new decision. Banks are also allowed to accept invoices for goods that had already been shipped before the decision was issued.

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

Enterprise is available without charge thanks to the generous support of HSBC Egypt (tax ID: 204-901-715), the leading corporate and retail lender in Egypt; EFG Hermes (tax ID: 200-178-385), the leading financial services corporation in frontier emerging markets; SODIC (tax ID: 212-168-002), a leading Egyptian real estate developer; SomaBay (tax ID: 204-903-300), our Red Sea holiday partner; Infinity (tax ID: 474-939-359), the ultimate way to power cities, industries, and homes directly from nature right here in Egypt; CIRA (tax ID: 200-069-608), the leading providers of K-12 and higher level education in Egypt; Orascom Construction (tax ID: 229-988-806), the leading construction and engineering company building infrastructure in Egypt and abroad; Moharram & Partners (tax ID: 616-112-459), the leading public policy and government affairs partner; Palm Hills Developments (tax ID: 432-737-014), a leading developer of commercial and residential properties; Mashreq (tax ID: 204-898-862), the MENA region’s leading homegrown personal and digital bank; Industrial Development Group (IDG) (tax ID:266-965-253), the leading builder of industrial parks in Egypt; Hassan Allam Properties (tax ID:  553-096-567), one of Egypt’s most prominent and leading builders; and Saleh, Barsoum & Abdel Aziz (tax ID: 220-002-827), the leading audit, tax and accounting firm in Egypt.