Inflation persists as dollar scarcity holds up import shipments

Without dollars in the bank to pay customs fees on time, the government is rushing through exceptional shipments of strategic imported food commodities, such as wheat and cooking oils, in a race to supply basic consumer goods, said import sources who spoke to Mada Masr on condition of anonymity.

In the meantime, import shipments that are not considered strategically necessary continue to pile up, exacerbating scarcities in food, medicine and industrial markets and consequently pushing up prices for consumers.

Insufficient dollar liquidity has caused bottlenecks at Egypt's ports for over a year, hampering the passage of crucial goods into the import-dependent economy. The government has taken a series of steps to relieve the congestion, but most importers who spoke to Mada Masr said they are still unable to get a hold of their shipments.

And while the authorities have been able to secure some exceptional releases by deferring fee payments as they await delivery of loans from international lenders to stave off the crisis, many industry figures say their ability to do business is deteriorating, boding ill for the future.

With shipping containers stacking up along the coastline, the government first took action in December 2022 to ease the congestion. The efforts temporarily relieved the situation and brought prices down briefly in January.

But more recently, pressure has once again built at customs houses. Commenting on the situation in January, Prime Minister Mostafa Madbuly said that the government would be using the limited supply of dollars only on necessities.

Egypt has gained emergency liquidity for food supplies via two recent loans — one received in June 2022 from the World Bank and the other in January from the International Islamic Trade Finance Corporation, though an installment from the second loan is late to arrive.

Such is the liquidity shortage, that in a rush to distribute a series of around 18 wheat shipments arriving rapidly at ports over the first two months of the year, the government allowed the wheat into the country without completing customs formalities, said a grain importer who spoke on condition of anonymity. The importer said that following due procedures would have entailed a major payment in dollars over a short period of time, so the government promised payment at a later date.

The government food supply agency also rushed through a shipment of imported vegetable oils in the absence of liquid cash to pay for them, said a source in the vegetable oil import sector speaking on condition of anonymity. Authorities only completed the necessary paperwork over 10 days after the shipment was released, the source added.

Private sector traders importing their goods are not able to secure the same exceptional releases. A private sector grain importer speaking on condition of anonymity said that the situation was moderately better in January, when the government made substantial dollar allocations to relieve port congestion and around 60 to 70 percent of shipments could get through. Now, they said, only around 30 to 40 percent of shipments are made into the country, and the types of shipment depend on what's deemed most important. Amid turmoil in the poultry-rearing industry, food crops had priority over recent weeks, meaning that industrial goods and inputs remain stuck.

Prices continue to rise for consumers as a result. Finished food products, like pasta, are as much as 80 percent more expensive, a source working in the food industry told Mada Masr on condition of anonymity. “Wheat is 100 percent imported within the private sector, so flour and other derivatives all rely heavily on the dollar.” Dollar scarcity is also affecting their company's ability to finance the maintenance and operation of machinery at full capacity, they added, foreshadowing more difficulties in the future.

As a backlog builds up, so do importers' liabilities. “Importers deposited pounds with the banks months ago in advance payment for the shipments, then waited for [the equivalent in] dollars to be provided by the banks” and transferred to suppliers, said Mohamed al-Mohandes, the head of the engineering industries chamber at the Federation of Egyptian Industries.

But with liquidity slow to materialize in the banks, importers have had to top up their deposits, as the Egyptian pound has been devalued on three successive occasions over the past six months. They also have to front cash for additional fees in dollars and euros, said Federation of Egyptian Industries sugar and confectionery division head Hassan al-Effendy, to the shipping companies that own containers and who are late to get their equipment back Since the goods are still lingering in storage at ports. The fines compound weekly, he said.

Traders from various sectors told Mada Masr that they're losing their relationships with suppliers abroad as a result.