According to Egypt Today, the Central Bank of Egypt (CBE) announced yesterday cancelling the letter of credit (LC) system as a requirement for imports.
The CBE said in a statement that it decided to restore the documentary collections system for imported goods.
The decision to implement the LCs system, which has been in effect since March, required Egyptian banks to accept only LCs for imports in order to reduce dollar outflows from the country.
The LCs necessitate transactions between two banks at a higher cost and for a longer period of time, with payments made in advance. On the other hand, the documentary collections system allows direct transactions between importers and exporters, with the bank only acting as an intermediary.
Late in October, the CBE announced plans to start phasing out LCs for imports by December.
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.
According to statements made this week by Cabinet spokesman Nader Saad, Egypt succeeded in releasing about $5 billion worth of goods in the ports from the beginning of this month until the 23rd, while the value of the goods withheld now amounts to about $9.5 billion.
Saad said the government has developed a plan to release the remaining goods in the ports during the next short period.