State grains buyer the General Authority for Supply Commodities (GASC) has deferred opening letters of credit (L/Cs) for wheat payments amid the FX crunch, Supply Minister Ali El Moselhy told Reuterslast week. “We don't want to add pressure on the central bank. Hence we are phasing with the suppliers and so we have to thank the suppliers very, very, very much for their understanding,” El Moselhy said.

How it usually works: State-owned banks, on behalf of GASC, open 180-day L/Cs, where the supplier receives payment when they make the shipment. The state then has 180 days to pay the bank.

This hasn’t been the case: Banks are currently lagging behind and need to open L/Cs for as many as 11 wheat cargoes, traders told Reuters. “It was never this late. But the country was never in this situation before. This is brand new for Egypt,” one trader said.

Shipments are carrying on as usual: Despite the payment delays affecting shipments dating back to December, suppliers are continuing to participate in GASC tenders and making their shipments on time. “It's not normal but they know it's GASC and it's the government … They don't doubt they will be paid,” one unpaid supplier said.

But not for long: Delayed payments will eventually catch up with the GASC. “If we have two L/Cs unopened, we don't offer the third one … There was a lot of pressure to unload even though there was no L/C, and it was a huge amount so I had to go to our CEO and get approval,” another trader told the newswire.

We already have a lot of aid: The World Bank last year extended a USD 500 mn loan to improve Egypt’s food security, part of which is helping to pay for wheat imports. The International Islamic Trade Finance also doubled its financing agreement with the country to USD 6 bn to help the state meet its payments for imported wheat and oil.

The FX crunch isn’t just impacting wheat: The amount of money owed to international oil and gas companies has more than tripled to USD 3 bn since mid-2020 due to the shortage.

Ashmawy denies the news: “Egypt has never been late honoring financial obligations, for all external obligations, not just wheat purchases,” Assistant Supply Minister Ibrahim Ashmawy told El Hekakya’s Amr Adib last night (watch, runtime: 10:22). “We have more than one way to secure the needed funding for wheat purchases,” he said, adding that it’s possible that GASC has negotiated more flexible payment plans with one of its suppliers.

Our wheat reserves are looking much healthier: The government currently has enough wheat in reserve to cover six months, Ashmawy said. This is up from just 2.3 months at the beginning of April before the start of the local harvest. Egypt has imported some 2.9 mn tons this season, up 20% from last year and the GASC has auctioned off some 750k tons of imported wheat through the commodities exchange, Ashmawy said

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