Egypt's state grains buyer, the General Authority for Supply Commodities (GASC), has deferred opening letters of credit (L/Cs) to pay for wheat imports to alleviate financial pressures caused by a shortage of US dollars according to the country's supply minister, Ali Moselhy.

The minister also says Egypt is contemplating approving the currencies of some of its commodity trade partners to lessen the country's reliance on US dollars.

L/C difficulties

Egyptian traders say that payment problems started last December with wheat shipments due to be settled under 180-day L/Cs under which a supplier would normally expect to be paid by their bank when the shipment arrives. The government would then usually pay the supplier's bank in 180 days.

But banks acting for the GASC have only opened L/Cs weeks or months after shipments have arrived according to the traders.

Non-US dollar transactions

A US dollar shortage precipitated by the war in Ukraine has made it harder for Egyptian importers to secure the liquidity required to cover L/Cs.

In response, Egypt is now considering approving transactions in the currencies of its trading partners, including Russia from where the north African country buys around 60 per cent of its wheat. Cairo is also contemplating approving the Chinese and Indian currencies to lessen its reliance on US dollars according to Moselhy.

"We are very, very, very strongly considering to try and import from countries and approve their local currency [for use] with the Egyptian currency," he says.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.