The Central Bank of Egypt (CBE) has instituted a new policy regulating the procedure by which importers are provided with foreign currency by domestic banks, among other changes to its policies.
The CBE’s new regulations are an attempt to reduce fraudulent import valuations and to reinforce the national economy by strengthening the competitiveness of domestic products against foreign imports.
In a copy provided to Daily News Egypt, the document detailing the parameters of the new procedure mandates that only those imports where foreign financial institutions issue collection documents directly to banks operating in Egypt will be allowed, while collection documents that are provided by the importer to the Egyptian bank will be declined.
The CBE has granted banks one month to apply the new regulations from the time of the document’s issuance.
The CBE’s instructions also include obliging banks to acquire a 100% cash margin on letters of credit, which encourages the funding of commodities for commercial companies or governmental bodies, instead of the 50% that was applied before.
These instructions are also applied in the case of strengthening trade bills submitted for suppliers’ facilitations, to import supplies for these bodies, or to meet any obligations by the bank, including issuing letters of guarantee for import operations for traders and government’s agencies.
The CBE excluded the import of medicines, vaccines and related chemical materials, and baby formula from the cash margin.
These procedures will be applied on import operations, and will be implemented as of January 2016, according to the CBE’s instructions.
The CBE disallowed the use of credit limits authorised from banks for importers in paying the cash margin stated in these new instructions, including credit facilitations insured by securities or commercial documents.
The CBE affirmed the lack of restrictions on letters of credit related to importing commodities, not for the purpose of trade, such as capital commodities or requirements for production and other products imported by factories, except for those imposed by regular banking rules.
Meanwhile, the CBE moved to prevent refinancing import operations for the purposes of trade, which is subject to the 100% cash margin, through offering temporary facilitations in foreign currencies. It has also allowed re-financing import operations for non-trade purposes, including the import of basic commodities such as food and ration—excluding the General Authority for Supply and Commodity.