{"id":578471,"date":"2023-01-02T02:51:41","date_gmt":"2023-01-02T02:51:41","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/2023\/01\/02\/importers-can-now-turn-the-page-on-l-cs\/"},"modified":"2023-01-02T02:51:41","modified_gmt":"2023-01-02T02:51:41","slug":"importers-can-now-turn-the-page-on-l-cs","status":"publish","type":"post","link":"https:\/\/enterpriseam.com\/egypt\/2023\/01\/02\/importers-can-now-turn-the-page-on-l-cs\/","title":{"rendered":"Importers can now turn the page on L\/Cs"},"content":{"rendered":"

Moves on import curbs + privatization:<\/strong> Egyptian authorities removed import restrictions and approved the state ownership policy document on Thursday, helping fulfill pledges made to secure vital funds from the IMF. The government had committed to reducing state involvement in the economy and canceling the requirement for importers to use letters of credit as part of the USD 3 bn loan agreement<\/a> approved by the Fund last month.<\/p>\n

L\/C\u2019S ARE HISTORY-<\/strong><\/p>\n

<\/a> Documentary collection is back: <\/strong>The Central Bank of Egypt (CBE) announce<\/a>d<\/a>Thursday<\/a> that it had lifted the requirement to use letters of credit to finance imports in an effort to clear a longstanding backlog of imports. Importers will now be able to use documentary collection to bring goods into the country, the central bank said, reversing a decision taken in February to curb large outflows of foreign currency triggered by the war in Ukraine.<\/p>\n

REMEMBER-<\/strong> A shortage of foreign currency has made it difficult for importers to access L\/Cs. This left them unable to bring goods and raw materials into the country, resulting in shortages of industrial and consumer goods, economic disruption, and higher inflation.<\/p>\n

No surprises here: <\/strong>Egyptian authorities had agreed to fully phase out mandatory L\/Cs by the end of the year in tandem with the agreement with the IMF in October, which committed them to adopting a permanently flexible exchange rate. President Abdel Fattah El Sisi said last week<\/a> that banks would secure the FX needed for outstanding L\/Cs before the end of the year.<\/p>\n

The current size of the backlog isn\u2019t exactly clear:<\/strong> Prime Minister Moustafa Madbouly said<\/a> at the weekend that goods worth some USD 1.24 bn were released in the final week of December \u2014 bringing the total released last month to more than USD 6 bn \u2014 but didn\u2019t disclose how much remains stuck in port. The government last week pegged the value at USD 9.5 bn<\/a> as of 25 December. The state will prioritize the release of foodstuffs and medical supplies ahead of Ramadan, Madbouly said.<\/p>\n

PRIVATIZATION STRATEGY GREENLIT- <\/strong><\/p>\n

<\/a> President Abdel Fattah El Sisi approved the final draft of the long-awaited <\/strong>state <\/strong>ownership policy<\/strong>, a document which provides a roadmap for how the government intends to reduce its involvement in the economy and boost private investment, cabinet said in a statement<\/a> Thursday.<\/p>\n

REFRESHER-<\/strong> Launched in May<\/a>, the strategy aims to more than double the private sector\u2019s role in the economy to 65% and attract USD 40 bn in private investment by 2026. The government says it will reduce its involvement in a number of sectors via public share offerings, stake sales to strategic investors, and expanding public-private partnerships. The president\u2019s approval comes after the cabinet in early December approved the final draft, which was produced following weeks of consultations with public- and private-sector stakeholders over the summer and discussions at the Egypt Economic Conference in October. The government has until now been tight-lipped about the strategy.<\/p>\n

WHAT WE KNOW NOW<\/strong>-<\/strong><\/p>\n

The state isn\u2019t going to be exiting quite as many industries as we first thought:<\/strong> The government is planning to fully exit 62 sectors, phase out its involvement in 56, and step up its role in 76 others, cabinet said. The initial draft plan<\/a> envisioned the government withdrawing from 79 sectors and reducing its involvement in 45.<\/p>\n

This is now happening over a longer timeframe:<\/strong> The government will fully exit the 62 industries over the next 3-5 years, according to the final document<\/a>. The initial draft targeted a maximum of three years.<\/p>\n

A few notable changes between May and December: <\/strong>The final document doesn\u2019t provide a complete breakdown of how each economic sector will look in five years\u2019 time, but it does illustrate a few of the changes that have taken place since May:<\/p>\n