The African Export-Import Bank (Afreximbank) will arrange a facility of up to $1bn for the Central Bank of Egypt (CBE).
Afreximbank President Benedict Oramah said “the facility could operate either as an allocation of trade finance lines of credit to key state-owned commercial banks based on a list of import letters of credit” with them, or as “a foreign exchange swap arrangement with the CBE under which Afreximbank would fund the CBE with U.S. dollars in exchange for an equivalent amount of Egyptian pounds”, according to a press release from the bank.
“We have list of banks led by National Bank of Egypt and so far we have about 10 banks on the list and expect to have more,” Head of External Communications at African Export Import Bank Obi Emekekwue told Daily News Egypt.
All $1bn will be directed to complement the efforts of the CBE to improve foreign currency liquidity. Emekekwue said the distribution of money to the banks will be based upon their requirements for liquidity, rather than the allocation of an equal amount to each bank.
“The bank is ready to spend money once it reaches a final agreement with the CBE. At the moment, we do not know how quickly it will be finalised,” Emekekwue said. “This is a new programme separate from the size of credit allocated by Afreximbank to support trade between Egypt and Africa, amounted to $500m.”
Oramah presented the proposal during a courtesy call on CBE Governor Tarek Amer Wednesday and said the Countercyclical Medium Term Trade Liquidity Facility would support imports of essential goods towards the sustenance of industrial activity in the country.
“The facility is part of our effort to support African central banks to improve foreign currency liquidity,” Omarah said.
Once the proposal is approved by the CBE, Afreximbank would start mapping out the operational modalities with the relevant parties.
He informed Amer that they initiated another $500m Egypt-Africa Trade Promotion Programme aimed at facilitating trade between Egypt and the rest of Africa. Moreover, it will deepen industrial activity in Egypt by financing the import of capital goods and supporting improved access of Egyptian entities to African markets.
Afreximbank identified Egypt as one of five hubs for the facilitation of intra-regional trade in Africa, and was working to support the re-emergence of export trading companies across the continent. It will also direct its investment and country risk guarantee programme to the Egyptian government to help attract foreign investment into the country, he said.
In a previous interview, Oramah told Daily News Egypt that the amount of credit allocated for Egypt amounted to $500m, and the bank will increase it to reach $1bn by early next year. The bank is conducting some infrastructure projects in Egypt, such as electricity projects, petrochemicals, manufacturing projects, and small and medium enterprises.
Afreximbank is the foremost pan-African multilateral financial institution devoted to financing and promoting intra- and extra-African trade. Since 1994, it has approved almost $35bn in credit facilities for African businesses, including about $4.5bn in 2014.