August 17, 2023

 

Al Dahra and ADEX secure US$500 million wheat supply deal with Egypt

 

UAE-based agribusiness Al Dahra and the Abu Dhabi Exports Office (ADEX) have formalised a deal to provide Egypt with wheat, according to a statement released on Monday, Reuters reported.

 

This five-year agreement, valued at US$100 million per year and totaling US$500 million, stands to furnish Egypt with imported milling wheat at competitive prices.

 

Given Egypt's status as a major purchaser of essential commodities, the country has been grappling with a foreign currency shortage in the aftermath of the Ukraine conflict, which has sent shockwaves through its economy.

 

Egypt's currency has experienced a steep decline of nearly 50% against the dollar, and its official headline inflation rate has surged to a historic high of 36.5%.

 

In response, the nation has adopted strategies such as deferring payments for wheat imports, as it navigates the challenge of sourcing funds for servicing foreign debt obligations.

 

"The low-cost financing package from ADEX helps us procure high quality wheat at the lowest cost financing available, with comfortable payment terms," said Egypt's supply minister Ali Moselhy in a statement.

 

Recent acquisitions of wheat have largely been facilitated through loans from institutions like the International Islamic Trade Finance Corporation (ITFC). Last year, ITFC doubled its credit facility extended to Egypt to US$6 billion. Additionally, funding has been secured from the World Bank for wheat imports earlier this year.

 

In light of these dynamics, Egypt's finance ministry disclosed a 41.9% increase in funding allocated for food subsidies, particularly for staples like bread. This funding surge is anticipated to amount to EGP 127.7 billion Egyptian (~US$4.1 billion; EGP 10 = US$0.32) during the fiscal year spanning from July 2023 to June 2024.

 

In accordance with the agreement, Al Dahra will initiate wheat supply to Egypt starting this year. Notably, the Emirati firm is already engaged in supplying locally produced wheat to the Egyptian government via its subsidiary operating within Egypt. This subsidiary manages 28,000 hectares of agricultural land in the country.

 

ADEX functions as the export financing arm of the Abu Dhabi Fund for Development, a governmental agency.

 

-      Reuters