Egypt recently started transacting with other countries in their own currencies rather than the US dollar.
This comes after the country decided to use the Russian ruble and the Indian rupee to import products from Russia and India.
As a result, Egypt won’t be required to secure USD in order to import goods from both nations.
A number of countries, including Malaysia, Japan, Thailand, and China, have adopted and welcomed the local currency settlement (LCS) system since 2018.
According to the Bank of Indonesia, this contributed to a positive LCS growth trend in the financial markets, with $868 million recorded in the first quarter (Q1) of 2022. Experts argue that implementing this LCS method in international commerce will aid Egypt’s economic revival.
Accepting Local Currencies in trading transactions:
Russian Ambassador to Cairo Georgy Borisenko mentioned in September 2022 that his country chooses a settlement mechanism using the local currency in exchanges of goods between Egypt and Russia, which includes mutual acceptance of payments in the Egyptian pound or the Russian ruble in the two countries trade.
Moreover, India adopted a new foreign trade policy to trade in rupees with countries facing a shortage of dollars in order to “disaster-proof” them and to boost its exports, Sunil Barthwal, Commerce Secretary, said in a news conference in New Delhi late March 2023
To import using the local currency of the exporting country, Egypt needs to reach an agreement with the central banks of these countries to obtain their currencies for trade or to allow the payment in EGP for them.
While the North African country mainly imports its wheat from Russia, its wheat imports from Russia decreased by 6.7% in 2022; however, Russia’s share of Egyptian wheat imports increased to 57% from 50% in 2021, according to Reuters.
Moreover, Egypt’s rice imports from India were worth $87.19 million in 2022, according to the United Nations COMTRADE database on international trade. Egypt plans to purchase at least 150,000 tons of rice from India; therefore, getting into a deal with both India and Russia is beneficial for Egypt, which has just resolved an issue of goods piling up at ports due to the USD shortage..
