The Central Bank of Egypt (CBE) signed a $500 million trade finance facility agreement with the African Export-Import Bank (Afreximbank) to allow Egyptian importers to buy strategic and key industrial products.
The Cairo-based Afreximbank stated on Thursday on its website that it would move on the implementation of the agreement to ensure quick delivery of its benefits to the most populous Arab nation, which is currently facing a crunch US dollar shortage.
Egypt has been facing a dollar crisis since losing about half of its $36 billion international reserves in the wake of 2011 uprising that toppled president Hosni Mubarak, which was followed by a security vacuum that has scared away tourists and investors.
The new agreement is part of a $3.5 billion financing programme approved by Afreximbank in December “aimed at enabling the bank’s member-countries to adjust to current adverse economic shocks, especially commodity price and terrorism-induced ones,” the bank said.
In November, Afreximbank offered the CBE to arrange a facility of up to $1 billion to improve foreign currency liquidity through either trade finance lines of credit to key state-owned commercial banks or funding the CBE with US dollars in exchange for an equivalent amount of Egyptian pounds.
Over the last week, the US dollar has jumped to register more than nine Egyptian pounds in the black market against an official rate of EGP 7.80 amid a lack of the currency, which, if continued, would threaten the world’s biggest wheat importer into struggling to save subsidized food staples to low-income families.
The CBE has already imposed strict regulations on financing imports to prioritise essential, non-luxury goods, aiming to reduce Egypt's import bill by $20 billion this year after reaching $80 billion in 2015, according to statements made by governor Tarek Amer in an interview with Reuters.
In a report handed to the Egyptian premier, the CBE said it injected around $14 billion dollars into local banks over the past three months to facilitate import activity and curb inflation on essential goods.