CAIRO/DUBAI: Egypt, the world's largest wheat buyer, has not issued letters of credit covering 16 recently purchased cargoes, effectively delaying payment and sowing confusion amongst suppliers, sources familiar with the matter told Reuters on Wednesday.
In previous years, acute shortages of foreign currency have caused delays but Egypt's net foreign reserves registered $44.513 billion at the end of November, a figure estimated to cover around nine months of imports.
"This kind of delay is not unheard of and there have been incidents before but the difference this time is two things, first of all it is a large amount of wheat, three shipment periods and secondly they felt the need to tell some suppliers that the letters will not be issued until January, that is what is causing some concern," one Cairo-based trader said.
Cairo, which prioritises spending on its massive wheat import programme, pays around $1.5 billion annually for the grain as part of a bread subsidy programme relied on by tens of millions of Egyptians facing IMF-backed austerity measures.
The payment issue, which affects cargoes amounting to 945,000 tonnes of wheat, goes as far back as shipments purchased in international state buying tenders that arrived at the end of November.
"We don't know the exact nature of the problem as to why there is a delay in letters of credit but what we do know is nothing will happen before January because that is what the ministry of finance has told GASC," another Cairo-based trader with knowledge of the matter said.
The three shipping periods affected are Nov. 11-20, Dec. 1-10 and Dec. 11-20, traders said.
Egypt's state grain buyer, the General Authority for Supply Commodities (GASC) has asked traders who sold cargoes for the Dec. 11-20 shipping period if they could delay their shipments until January, trade sources said, while suppliers for the other two shipping periods were not informed in advance of a delay.
When state tenders are awarded, the firm selling the commodity asks for a letter of credit, or guarantee of payment, from one of Egypt's state-owned banks, which is then confirmed with its own bank.
GASC's letters of credit are typically issued for payment within 180 days.
GASC and the supply ministry which oversees it were not immediately available for comment.