Egypt’s C.bank puts an end to controversial Letter of Credit system for imports

Egypt has terminated the use of the system requiring importers to obtain letters of credit (LCs) for their purchases and returned to the cash-against-documents system for importing goods upon Central Bank of Egypt decision announced on Thursday.

In late October, the CBE announced that it would begin a process of ending letters of credit system for import finance by the end of December.

Last February, the CBE instituted the LCs system obliging all importers to use letters of credit to finance their imports instead of the collection system of cash-against-documents that had been in force for many years.

The February decision exempted foreign companies and subsidiaries from the rules.

However, the LCs system was met with objections from importers and business men who said it would worsen existing supply chain problems, increase production costs and lead to higher inflation.