Egypt Delays Wheat Payments Amid Dollar Shortage

Egypt, a major global wheat importer, has opted to defer payments for its substantial wheat purchases, facing challenges associated with a shortage of hard currency. This decision, unprecedented in terms of its duration, comes as Egypt addresses financial pressures resulting from a scarcity of foreign exchange.

As one of the world’s largest wheat importers, Egypt relies on these purchases to produce heavily subsidized bread, a crucial benefit for millions of its citizens. Despite the delays in payment for state-purchased wheat, most cargoes have been successfully shipped and unloaded, with no impact on Egypt’s state wheat reserves used for subsidized bread production.

Post the conflict in Ukraine, Egypt has become increasingly dependent on Russia for its wheat supply. The country’s supply minister cited a shortage of foreign currency as the primary reason for deferring payments, seeking to alleviate financial pressures.

While these payment delays have not affected subsidized bread production, traders report that the delays, stretching for months, are unusual and could be attributed to issues arising as early as December. Egyptian state-owned banks, including Banque Misr, are reportedly opening letters of credit weeks or months after shipment, causing delays in payments.

The delays, affecting wheat shipments, have not been officially reported, and Banque Misr has not commented on the matter.

Supply Minister Ali Moselhy acknowledged the delays, linking them to a shortage of foreign currency exacerbated by the economic aftermath of the war in Ukraine. He emphasized the government’s effort to coordinate with suppliers, expressing gratitude for their understanding.

Egypt typically purchases about five million tonnes of wheat annually from abroad, with subsidized bread reaching more than 70 million of its 104 million population.

The delays in payments are seen as a response to the broader economic challenges faced by Egypt, including the fallout from the Ukraine war, which led to a withdrawal of foreign investments, currency depreciation, and soaring inflation.

Despite the payment delays, Egypt continues to secure wheat purchases through various financing sources, including the International Islamic Trade Finance Corporation (ITFC) and the World Bank. Traders report that unpaid suppliers, while not happy with the delays, continue to trust the General Authority for Supply Commodities (GASC) and maintain competitive prices.

Egypt’s finance ministry anticipates a 41.9 percent increase in funding for food subsidies, primarily for bread, in the fiscal year from July 2023 to June 2024.

As Egypt grapples with these economic challenges, officials are reportedly exploring options, including considering the currencies of trade partners such as China, India, and Russia, to reduce dependence on dollars. Despite the delays in payments, traders express confidence in eventual payment from the government, attributing the situation to “the state of the country.”

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