The Central Bank of Egypt (CBE) has cancelled the Letter of Credit (LC) system as a requirement for imports and decided to restore the documentary collections system for imported goods, announced on Thursday.
In late October, the CBE has announced that it would begin a process of phasing out letters of credit system for import finance by the end of December.
CBE instituted in late February 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 LCs require transactions to take place between two banks at a higher cost and longer time with payments taking place in advance. The documentary collections system, on the other side, allows direct transactions between importers and exporters with the bank only acting as an intermediary.
The CBE’s February decision to oblige banks to deal with LCs was blamed for causing Egyptian ports to be full of stuck goods worth billions of dollars.
On Sunday, the Egyptian Cabinet announced plans to release goods at the ports, especially food products, medicines, and production requirements.
