The Central Bank of Egypt (CBE) reportedly eased restrictions on the use of foreign currency on Tuesday as part of the government’s broader strategy to clear a backlog of imports that’s contributed to soaring prices.
Under the changes, banks can now use balances of foreign currency held in company accounts before 19 September 2022 to open new letters of credit or inward documentary credits, several local news outlets, including Ahram Gate, Al-Mal’s online edition and Enterprise, reported citing document circulating among local lenders.
The latest revisions will allow parent companies abroad are also allowed to provide loans to their Egyptian subsidiaries, provided that the term of the loan ranges from one to five years and that the funds are used for import operations.
CBE’s latest measures are aimed at shifting greater responsibility onto the banks to verify sources of the funds and handle other issues that previously had to be vetted through the central bank, said a Bloomberg report.
Earlier this year, Egypt began to require importers to secure letters of credit from their banks to be able to buy some goods abroad, a procedure that’s been blamed for causing shortages of consumer products and driving up prices.
Under the revised rules, import operations can also be funded via currency transfers from abroad or by funds resulting from dividends paid abroad or company capital increases.
The move comes ahead of the central bank’s policy meeting on 22 September 2022, where the apex lender is expected to hike its overnight deposit rate by 100 basis points (bps) as it tries to dampen resurgent inflation, a Reuters poll showed Tuesday.
CBE raised the maximum amount of cash customers are allowed to withdraw from their bank accounts and scrapped limits on cash deposits entirely last month. The North African country is grappling with rising inflation and the broader economic fallout of the war in Ukraine.
