ITFC doubles Egypt’s credit limit to USD 6 billion to cover imports of wheat

The Saudi Arabia-based International Islamic Trade Finance Corporation (IFTC) has raised Egypt’s credit limit to USD 6 billion to address the rising costs of wheat.

Egypt is currently facing severe economic challenges as a result of the Ukraine-Russian war. The loss in tourism revenue caused by a lack of Russian and Ukrainian tourists visiting the country’s Red Sea resorts and the impact on Ukraine, the world’s largest producer of wheat, and Russia has led to soaring costs. Egypt’s annual consumption of wheat stands at 20 million tons and Egypt is the world’s largest importer.

Rising wheat costs linked to inflation

The Egyptian government announced that the increase in prices could require the disbursement of an additional envelope of 12 to 15 billion pounds. The Central Bank of Egypt recently raised interest rates for a second time since the outbreak of war in response to an increase in annual urban inflation of 13.1% in April, its highest level since May 2019.

Despite Egypt’s ongoing economic issues, the global credit rating agency Fitch recently assigned the Egyptian economy a rating of B+. The agency highlighted the country’s ongoing efforts to achieve fiscal discipline and keep the keep the deficit under control.

It is hoped that the doubling of the credit line will allow authorities to limit the outflow of foreign currencies as the Egyptian pound has been substantially devalued as foreign investors pulled billions of dollars from Egyptian treasury markets.

Wheat purchases and subsidies

Egypt had previously signed a USD 3 billion agreement with ITFC in January 2018 to ensure dollars were available for the country’s state grains buyer to use for payment at its international purchasing tenders.

Minister of Supply and Internal Trade Ali El-Moselhi claimed that purchases of wheat from abroad do not represent any pressure on the Central Bank of Egypt as the ITFC pays for and covers the country’s wheat imports.

According to El-Moselhi, Egypt plans to spend USD 4.4 billion on wheat imports through a subsidy program from which more than 60 million people stand to benefit.

Sourcing new suppliers

Earlier in May, the Egyptian Cabinet Media Center had denied reports regarding a decline in Egypt’s strategic reserves of wheat due to instability in the global food market. However, reports circulated that approximately 300,000 tons of wheat destined for Egypt were delayed in Ukraine due to the war and that the country was aiming to buy wheat from India. The Ukrainian shipments were booked by the Egyptian General Authority for Supply Commodities (GASC) and were meant for delivery in February and March, recent reports suggest that the supply issue might have been solved by moving the wheat through Poland. The move to purchase Indian wheat was part of the government’s attempts to diversify its sources and strengthen supplies from local producers.