Largest Wheat Importer

The population of Egypt, the most populous Arab state, is around 104 million and to put things in perspective is perhaps the worlds biggest importer of wheat. The impact of the conflict in Ukraine and subsequent hiking of interest rates, accompanied by a surge in global energy prices compelling foreign investment to flow out of Egypt to the West devastated Egypt economically. The Central Bank of Egypt devalued the Egyptian currency on two occasions but to little benefit. The country has foreign exchange reserves of almost $ 33.5 billion out of which $ 28 billion are deposits of friendly Gulf countries. The foreign debt of the country has in the last decade reached $ 157 billion. The economic situation has deteriorated to such an extent that supermarkets across Egypt are rationing wheat and other foodstuffs including edible oil. The Nile River runs across the length of Egypt and a significant area is under cultivation in the Nile delta. Presently imported consignments worth around $ 10 billion are pending clearance at the ports due to insufficient foreign exchange and dollars and letters of credits are not being opened for import clearance. Over invoicing by some importers , in connivance with Customs authorities , have aggravated the import bill. This situation is persisting since the last 6 months.

Curbs on Credit Card Payments and Bank Withdrawals

Factories and flour mills are closing down due to insufficient inventories, stocks and unpredictability of supplies of imported raw materials and inputs. Around 630,000 tons of wheat are waiting clearance at the ports and are perishable items. This is exacerbating the production of plants and sales volumes have drastically declined leading to massive unemployment. The retail sector has been hit hard and racks are no longer displaying essential items. The purchasing power has been eroded by a third. The Central Bank of Egypt has imposed curbs on credit card payments and restricted withdrawals in dollars from banks. In a new move tourists are compelled to pay travelling expenses in US dollars. To make matters worse shipping lines calling at the ports are paid charges in dollars as well.The origin of the crisis is in obtaining huge loans from multilateral agencies for visibility in mega projects such as bridges, overheads and road infrastructure with the prime beneficiaries being contractors. The crisis has become so severe that lifesaving medicines and anaesthetics are not being cleared by the Customs authorities and this being a sector where smuggled items cannot be used as being spurious. Administrative attempts to distribute cleared foodstuffs is a boon for corrupt officials which is further aggravating the situation.The myth of resilience and the ” Black Economy ” has imploded and it seems that the loans obtained from the IMF were keeping the economy afloat.

Privatisation of Strategic  Assets and IMF Loans

The Finance gurus of Egypt have proposed that goods and containers not cleared may be shifted to external warehousing facilities under the supervision of shipping agents to limit port and demurrage charges piling up on a daily basis which may exceed the original value of the consignments. Talks are ongoing to convene conferences aimed at import substitution and enhancing and value addition of exports. As a knee jerk reaction to international prodding privatisation of strategic assets and a source of national pride like the Suez Canal is being considered for privatisation. The Finance Minister has tried to placate national outburst by announcing that the Suez Canal revenues are being outsourced   to attract foreign investment which are perceived as desperate attempts by independent economists and detractors and also as a loss of sovereignty. This has invited national outrage as the citizens are being penalised for persistent economic mismanagement by the economic managers .Sale of strategic national assets may be eagerly looked forward to as lucrative kickbacks may be factored in  such deals. Rating agencies have categorised Egypt as one of the 5 countries likely to default on repayment of external loans. The Finance Ministry is awaiting a respite of around $ 3 billion, as loan the disbursement of which is spread over a period of 46 months, from external and multilateral agencies such as the International Monetary Fund. The amounts to be paid by Egypt in debt servicing for the ongoing financial year is near $ 41 billion. The situation presently looks bleak.

By Nadir Mumtaz