Governor of the Central Bank of Egypt (CBE) Tarek Amer cancelled a meeting scheduled on Tuesday with representatives of nine investor associations, an investor involved in the meeting told Daily News Egypt on condition of anonymity. The meeting was set to discuss banks calling on companies to pay for the exchange rate gap from letters of credit issued to cover imports.
A source said that Amer refused the attendance of the legal advisor to the associations. Representatives had demanded his attendance, to which Amer reportedly responded “then let us cancel the whole thing,” according to the source.
On 3 November, the CBE had issued a decision to float the Egyptian pound. The flotation caused the pound to drop in value from EGP 8.88 per US dollar to over EGP 18, which caused the value of the letters of credit—issued to cover imports—to spike.
Banks then demanded companies to bridge the gap by paying the difference in the exchange rate before and after the flotation. The demand was refused by companies, attributing their refusal to their inability to pay.
Nine investor associations held a meeting on Monday to explain their situation.
Member of the parliament and head of Obour Investors Association, Mohamed El-Morshedy, had said earlier that he received a phone call from Amer inviting him to a meeting to discuss the problem with banks.
During a press conference, El-Morshedy shed light on the problem companies are facing on the back of banks calling on them to pay for the exchange rate gap in the letters of credit opened before the flotation of the pound.
Head of 6th of October City Investors Association, Mohamed Khamis Shaaban, said during the conference that the flotation decision raised the cost of importing, noting that the government should have studied the negative impact of such a decision before imposing it.
He pointed out that the Joint Stock Companies Law states that companies should declare bankruptcy if losses surpass 50%, which he said companies are now threatened with.
Amr Al-Heny, head of the Mills Division at the Federation of Egyptian Industries, said that negotiations with the CBE are currently related to the scheduling of debts of the exchange rate gap with zero interest.