Egypt ‘hopes for IMF deal by end-April’
Cairo, February 28, 2013
Egypt hopes to conclude a deal with the International Monetary Fund for a $4.8 billion loan by the end of April, the investment minister said on Thursday.
"We have hope, God willing, that we can, by the end of April complete the loan," Osama Saleh, the investment minister, told journalists.
Earlier, the state-run newspaper al-Ahram reported that the government would formally invite an IMF team on Thursday to reopen talks on a deal.
Meanwhile, funding problems are forcing Egypt to consider abandoning its regular public tenders that have been a centrepiece of world grain trade for decades.
Egypt's state grains buyer General Authority for Supply Commodities, (GASC), is exploring options beyond systematic tenders to secure future needs, banks involved in commodity trade finance for the country said.
Imports to the north African country are sharply down this year, with strategic stocks falling as it endures economic and political crisis, but state and private buyers insist they have funds to keep the nation supplied with its staple bread.
Falling currency reserves are hindering GASC's ability to buy wheat in a timely manner, banks said.
GASC, which last week saw its influential head Nomani Nomani step aside, declined to comment.
"Very clearly people are looking for alternatives because the classic route of letters of credit or cash against documents are not working as they were," said Fehmi Hannachi, head of commodity finance for Middle East and North Africa at ABC International Bank plc and board member of ABC Egypt.
Karel Valken, global head of trade and commodity finance at Rabobank, said: "Letters of credit are not working to the satisfaction of all parties. It's definitely restricting the volumes and the timely arrivals of wheat and undoubtedly it's having an impact on the price. Consequently all the parties involved are looking at different ways to mitigate these issues."
Egypt normally buys strategically to ensure it has wheat stocks equal to at least six months' consumption in its silos. By contrast, the government said on Wednesday that it has stocks to last until May 29, or just three months.
GASC tenders are watched avidly by international wheat traders and without them world markets would lose a vital window of transparency.
Banks said trade houses were exploring options outside of GASC's current sourcing strategy, including private deals.
"GASC's main objective is to feed the Egyptian population in the most cost effective way and if that means for them to go out of tender terms and do a private deal they will undoubtedly do that," said Valken.
When GASC awards a tender the company selling the wheat typically asks for the issuance of an Egyptian state bank letter of credit, which is then confirmed with its own bank.
A recent development has been a requirement for GASC to post cash with Egyptian banks which serves as security for the banks confirming the letters of credit on behalf of sellers.
"This flow is still working, it's just becoming more difficult because of amongst other things the (country's situation with) FX reserves and consequently GASC's access to cash and credit with its own banks," said Valken. -Reuters