Egypt: Food Payments Delayed as Financial Crisis Bites

People queue for bread at a bakery in Cairo, 2 March .(Reuters)

Egypt is struggling to make payments for food commodities as its long-running financial crisis bites banks and traders selling to Cairo.

Funding problems that surfaced under the last government are re-emerging as the country gears up for presidential elections this month.

The Egyptian state has subsidised food for decades in a bid to prevent social unrest but the world's largest wheat importer is again delaying its payments for the commodity.

"Egypt's political turmoil since 2011 has affected the country's foreign currency reserves because of the fall of tourism and foreign direct investment," Mohamed Tousson, head of structured trade violence at Ahli United Bank's Egypt subsidiary, told Retuers.

"This forced the central bank to take drastic measures to direct its available funds to the strategic commodities, food-related items and medicine," he said.

Egypt has lurched from political crisis to crisis since early 2011, when its president Hosni Mubarak was ousted amid massive popular protests.

The country's first elected president, from the divisive Muslim Brotherhood organisation, struggled to raise funds from international markets and spent large amounts of the country's foreign currency reserves to keep the country running.

Amid frequent power cuts and popular protests over the Islamist nature of his politics, Mohamed Morsi was weighed down by domestic disorder which eventually led to his removal from office in a military-engineered coup last summer.

The former head of the armed forces, Abdel Fattah al-Sisi, is the hot favourite to be elected as president in this month's elections. If he wins, he will inherit an ailing economy, beset by structural and financial woes.

Traders and bankers told Reuters that foreign currency shortages and central bank caution in allocating funds were slowing down state payments for food. They also said the preparation for elections is slowing down administrative procedures across government.

Egypt's foreign currency reserves stood at $17.489bn last month, compared to the $36bn in 2010.

The Arab world's most populous nation imports around 10 million tonnes of wheat every year, which eventually reaches the country's 85m citizens in the form of heavily subsidised bread.