Meeting currency demands

Safeya Mounir , Tuesday 8 Nov 2022

The Central Bank of Egypt is gradually meeting demands by the country’s importers for more hard currency, reports Safeya Mounir

The Central Bank of Egypt is gradually meeting demands by the country s importers


Last week, Egypt’s business community was pleasantly surprised by an announcement that the Central Bank of Egypt (CBE) had obtained the necessary funds in dollars to cover 4,000 shipments of production requirements and food commodities that had earlier been sitting at the ports.

Alaa Ezz, secretary-general of the Federation of Egyptian Chambers of Commerce (FEDCOC), urged factories and the importers of food commodities to ascertain that they have sufficient funds in Egyptian pounds to cover their imports at the current exchange rate.

Although approvals for dollar disbursements have come through for many of them, some of their accounts lack sufficient Egyptian pounds to cover their shipments.

Ezz said that the ministers of supply and industry had agreed with manufacturers and the importers of food commodities that food-manufacturing plants would operate at full capacity to increase the supply of goods nationwide.

In February, the CBE obliged the banks to accept only letters of credit (L/C) for the purchase of imports. This process meant that importers had to pay the full amount of their goods in Egyptian pounds upfront instead of in part, as was the case when documentary collection was used instead.

The L/C requirement has caused long delays in releasing goods at the ports, affecting production in various industries.

The ports have already begun to release raw materials and food and production requirements, said Matta Bishai, head of the Supply and Internal Trade Committee at the Importers Division of the Federation of Chambers of Commerce. This will reactivate production, especially for medicines, dairy products, and other industries recently affected by shortages.

“The raw materials have begun to leave the ports, but we can’t call it a breakthrough yet,” said Mohamed Hanafi, director of the Chamber of Metal Industries. He explained that much of the raw materials for that sector, such as aluminum, iron ore, steel components, graphite, pellets, and scrap, still remained in the port, but the process of releasing them had started.

In a step intended to ease the pressures on importers, in a circular sent to the banks on 27 October the CBE announced that it had raised the value of shipments exempted from the letter of credit requirement from $5,000 to $500,000 or the equivalent in other currencies. Prime Minister Mustafa Madbouli promised in October that the system would be done away with by the end of the year.

According to Mohamed Al-Mohandess, chair of the Chamber of Engineering Industries, the banks are handling the situation gradually to avert foreign-exchange shortages, while also “working to facilitate production and enable the release of raw materials and intermediate goods.”

The shortage of goods and commodities because of their backing up in the ports has driven up prices, especially of meat and poultry, eggs, and related products.

*A version of this article appears in print in the 10 November, 2022 edition of Al-Ahram Weekly.

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