Why Egypt Scrapped its Recent Letter of Credit Requirement for Imports

On 29 December 2022, the Central Bank of Egypt (CBE) abolished a rule announced less than a year before, requiring importers to use of letters of credit, which had caused backlogs at ports.

The rule had been brought in to try to curb dollar outflows from the country, but the delays it caused for importers, and those relying on flows of imported goods, came at time when Egypt was also struggling with currency devaluation and high inflation. Even though some goods, including certain foods and vaccines, were not subject to this requirement, the negative effect on the economy was significant.

The letter-of-credit rule was blamed for causing Egyptian ports to be full of stuck goods, worth billions of dollars. For instance, according to an Egyptian government spokesman at the time, during three weeks in December 2022, imports worth $5 billion were released from Egyptian ports, but $9.5 billion-worth were still stuck, awaiting release.

A letter of credit provides an irrevocable guarantee to the exporter that the importer’s bank will remit the dues to the exporter. By re-allowing documentary collection transactions, direct transactions between Egypt’s importers and their overseas suppliers have been freed up again.

Total UK exports to Egypt amounted to £2.5 billion in 2022, an increase of 16.4% over the previous year. The UK government has identified a number of sectors in which valuable opportunities exist for British exporters, including: education, oil and gas, energy, healthcare, and infrastructure.

Contact us for advice about trading with Egypt, or for help with Letters of Credit and other international payment methods.