India is considering a proposal to initiate barter trade with Egypt, focusing on goods like fertilizers and gas, as part of a broader agreement that could involve extending a credit line worth several billion dollars to Cairo. Sources familiar with the matter revealed that an official announcement regarding the agreement is expected later this month during Indian Prime Minister Narendra Modi's inaugural visit to Egypt. The move comes as Egypt grapples with a prolonged shortage of foreign currency.
Barter Trade for Debt Settlement and Rupee Purchases
Under the proposed agreement, Egypt would be allowed to make purchases in Indian rupees, with bartering being considered as a possible means of settling the debt through the sale of Egyptian products that could be beneficial to India. The Indian Ministry of External Affairs is currently consulting with relevant departments to gauge their interest in importing fertilizers and gas from Cairo as part payment for the credit line.
Diversifying Fertilizer Imports and Wheat Supply Concerns
India is particularly interested in diversifying its fertilizer imports, especially after facing shortages in certain states in 2021 due to export restrictions imposed by China and a significant surge in prices. However, Egypt's request for wheat supplies might face obstacles, as India has imposed a ban on wheat exports since May 2022 to stabilize domestic prices. Consequently, the Indian official indicated that shipping wheat to Egypt is unlikely.
Negotiations and Details Yet to be Finalized
The proposed deal is still in the negotiation phase, with discussions ongoing regarding the companies involved and the specific commodities to be included. Egyptian Supply Minister Ali Moselhy confirmed the ongoing discussions but did not disclose the size of the potential credit line. Other sources from both India and Egypt preferred to remain anonymous as they were not authorized to speak to the press. Requests for comments from the relevant ministries in India and Egypt have not been immediately answered.
Stabilizing Egypt's Economy Amidst Pandemic Challenges
Egypt, grappling with the impact of the pandemic and soaring commodity prices, has faced challenges in stabilizing its economy. To address a shortage of funds, the country has delayed payments for its significant wheat purchases, sometimes by several months. Foreign investors have withdrawn approximately $20 billion from Egypt's financial markets, adding further strain to the economy.
The proposed barter trade and credit line deal between India and Egypt aims to address the foreign currency shortage in Egypt while diversifying India's fertilizer imports. The negotiations are ongoing, with details such as the specific goods and companies involved yet to be finalized. As Egypt seeks to stabilize its economy, this agreement could provide much-needed relief, especially considering the challenges posed by the pandemic and high commodity prices.