The African Export-Import Bank (Afreximbank) has agreed to arrange a facility of up to US$1bn to the Central Bank of Egypt (CBE), to help the country boost its low foreign currency reserves.

Afreximbank will underwrite US$500mn of the ‘countercyclical medium-term trade liquidity facility’, which aims to support imports of essential goods and help maintain the country’s industrial activity.

The Egyptian foreign exchange reserves stood at around US$16.4bn in October, an amount which can cover basic imports for three months, according to the CBE.

The deal could be used in two ways: either as an allocation of trade finance lines of credit to key state-owned commercial banks on the basis of a list of import letters of credit, with Afreximbank using the allocated money to honour payments, to be repaid later by the Egyptian banks; or in the form of a foreign exchange swap arrangement with the CBE, under which Afreximbank would provide the CBE with US dollars in exchange for an equivalent amount of Egyptian pounds.

The proposal was presented by Afreximbank president Benedict Oramah on a courtesy call to the CBE’s new governor Tarek Amer last week, and is now under review by the CBE. If it receives its “favourable consideration”, Afreximbank will start drafting the operational modalities with the relevant parties.

Afreximbank has also initiated a US$500mn Egypt-Africa trade promotion programme to finance imports of capital goods and support improved access of Egyptian entities to other African markets.