The African Export-Import Bank (Afreximbank) signed a $500m facility agreement with the Central Bank of Egypt (CBE), Afreximbank’s president Benedict Oramah announced Thursday.
“This agreement aims to help Egyptian importers to alleviate temporary foreign currency availability constraints for the importation of strategic industrial products,” Oramah said.
Under the terms of the agreement, Afreximbank will provide the CBE-sponsored Countercyclical Trade Liquidity Facility to eligible importers who are approved by the CBE.
“The facility will focus on imports considered strategic to the Egyptian economy,” the bank said in an official statement.
Oramah said the bank planned to expedite the implementation of the facility in order to ensure the expected benefits. However, he did not provide an exact time.
Afreximbank is determined to support the efforts undertaken by the Egyptian authorities to address the foreign currency liquidity challenges confronting the country, in order to reciprocate the strong support it has received from Egypt, Oramah noted.
The Afreximbank facility is part of a $3.5bn financing programme, approved by the Afreximbank board of directors at its last meeting in Seychelles in December. The programme aims to allow the bank’s member countries to adjust to current adverse economic shocks, especially those related to commodity pricing and terrorism.
CBE Governor Tarek Amer said the bank “was striving to improve and to bring discipline into the Egyptian market through the substantive policy measures it was implementing.”
The CBE recently raised the dollar deposit cap to $1m per month for importers, following a previous decision to raise it $250,000 from $50,000.
International credit rating agency Moody’s issued a report in which it stated that attempts made by CBE in the past year have resulted in high degrees of variance in the US dollar’s value against the Egyptian pound. However, it contended these measures have been ineffective in ensuring foreign currency liquidity.
“Although the central bank’s action aims to increase the availability of dollars to the local banks, it will not be sufficient to ease the increasing liquidity pressures in foreign currencies that Egyptian banks face, since new dollar deposits will still be below the demanded amounts necessary to finance imports,” the agency’s report read.
In a contrary statement, Amer contended that the CBE’s measures have increased the liquidity of US dollars in the Egyptian market, stating that some exchange rate improvements had been observed.
The Egyptian pound-US dollar exchange rate exceeded EGP 9 per US dollar on the informal market for the first time since Egypt’s began participating in the foreign exchange market. The devaluation of the Egyptian pound comes amid continued inflation, constraints on import operations, and expected austerity measures.