Egypt: Canceling L/Cs requirement; a possible step to ease import restrictions
Did your exports to Egypt face difficulties during 2022 due to rationing of foreign exchange? The cancellation of the requirement of letters of credit (L/Cs), might facilitate export transactions.
The Central Bank of Egypt (CBE) announced last December the canceling the letter of credit (L/C) system as a requirement for imports. CBE said in a statement that it decided to restore the documentary collections system for imported goods. With this measure, Egypt hopes to reduce trade barriers and restore its image as an attractive destination for foreign investors.
Trade regulations in Egypt have faced frequent changes over the past few years. The government imposed an L/C system last March as a mandatory requirement in order to manage a shortage of foreign exchange. This system has further complicated the process of exporting goods to Egypt and makes it difficult to transfer foreign currency outside Egypt. The system caused goods worth billions of dollars to be stuck at Egyptian ports. This has left Egyptian farmers at risk of securing seeds and inputs needed to export their crops overseas and for Dutch companies to receive their money. These regulations have resulted in increased costs and delays for importers and affected the image of Egypt.
Unfortunately, there are still more challenges facing the trade environment which create a high degree of uncertainty. As Egypt moves forward with the International Monetary Fund's loan agreement into 2023, it will be crucial to assess if this will improve the ease of doing business. The Egyptian economy is heavily reliant on imports, therefore its ability to secure foreign currency for imports is an important challenge. With the influx of IMF loan money, Egypt needs to find ways to make effective use of it in order to boost their trade situation. Making sure that investments in key generate returns and sectors and those regulations can adequately facilitate local industries will be essential if the money is going to have a positive impact on their trade transactions.
The agricultural team of the embassy will follow up on developments and stand ready to provide updates when needed: KAI-LNV@minbuza.nl