Egypt’s GASC to pay for wheat within 180 days instead of immediately

Around 100 million people depend on Egypt's bread subsidy program. (AFP/File)
Updated 25 March 2019
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Egypt’s GASC to pay for wheat within 180 days instead of immediately

  • GASC announced in January they will start immediate on-sight payments for grains
  • The state grain buyer was not available for a comment

DUBAI/HAMBURG: Egypt, the world’s largest wheat importer, will go back to paying its grain suppliers within 180 days instead of immediately, a government source and traders said on Monday.
Egypt’s state grain buyer GASC had said in January it would start immediate on-sight payment after obtaining financing from Islamic Trade Finance Corp. for its international purchasing tenders.
Before that announcement, GASC had for years used a deferred payment system introduced at a time when foreign-exchange shortages plagued Egypt’s economy, pushing up wheat prices offered to the state buyer at its international tenders.
“We can switch between the two payment methods if we don’t have the financing available,” the government source, who is close to the matter, said.
“The next tender to be announced will be with 180-day facilities,” he said.
GASC was not immediately available for comment.
The state buyer secured $1 billion of a $3 billion Islamic Trade Finance Corp. deal to fund its wheat purchases in January.
Prior to that deal, GASC’s letters of credit — banking guarantees for on-time payment to sellers — were being issued prior to shipment, with payment guaranteed within 180 days.
GASC is reverting to that deferred payment system for its upcoming tender, the government source said on Monday.
A senior government source told Reuters in January that the financing from Islamic Trade Finance could be renewed when the initial $1 billion tranche was used up, so deferred payments would no longer make purchases more expensive for GASC.
Egypt said at the end of February it had used $213 million in funding from Islamic Trade Finance for wheat purchases so far, buying 1.02 million tons.
This latest reversal indicates that more funding from that facility is not now readily available, traders said.
“The question being asked is how much money Egypt has,” a European trader said.
“I think this (delayed payment) would add $6 to $7 a ton to the cost of buying wheat compared to immediate payment,” he said.
On-sight payment means cheaper offers by suppliers because the cost of financing deferred payment would be taken out of traders’ calculations when making offers to GASC at international tenders.
Cairo pays around $1.5 billion annually for the grain as part of a bread subsidy program on which many of Egypt’s almost 100 million people depend.


RBS says Saudi bank merger boosts its core capital

Updated 57 min 10 sec ago
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RBS says Saudi bank merger boosts its core capital

  • RBS had a 15.3% interest in Alawwal bank
  • The changes would boost the banks CET1 core capital ratio by 60 basis points

Royal Bank of Scotland (RBS) said on Sunday the completion of a merger between Alawwal bank and Saudi British Bank would lead to RBS shedding $5.9 billion of risk weighted assets and boost its core capital.
RBS, through Dutch subsidiary NatWest Markets N.V., was part of a consortium including NLFI and Banco Santander S.A. that held an aggregate 40% equity stake in Alawwal bank, the British bank said in a statement. RBS also had an interest equivalent to a 15.3% stake in Alawwal bank.
RBS said that as a result of the merger completion, it would recognise an income gain on disposal of the Alawwal bank stake for shares received in Saudi British Bank of almost $503 million and a reduction in risk weighted assets of nearly $5 billion.
RBS also said the deal would extinguish legacy liabilities of almost $377.
The changes would increase the bank's CET1 core capital ratio by 60 basis points, it said.
The merger will also help RBS to focus on its target markets, RBS chief executive Ross McEwan said in a statement.
RBS, which was rescued in 2008 with a nearly $57 billion capital injection by the British government, has been shrinking its overseas operations since the financial crisis to focus on its UK lending operations.