Recurrent gasoline and butane gas shortages raise questions about the government's ability to meet the country's demand for strategic commodities, reports Ahmed Kotb Long vehicle queues have once again become a common scene at many of the country's gas stations. And Greater Cairo is no exception. Meanwhile, queues for butane gas cylinders are even longer. But early this week, Minister of Petroleum Abdallah Ghorab said that the Egyptian General Petroleum Corporation (EGPC) is supplying the market with more than its needs, adding that there is no shortage of supply at all. He also said that Egypt produces 90 per cent of its gasoline needs and about 60 per cent of butane gas, according to government statistics. Similarly Hossam Arafat, head of the general division of petroleum products at the Federation of Chambers of Commerce, stressed that petroleum products are available in the market in quantities that exceed the market's needs. But, Arafat added, "there is a problem because of smuggling to the black market and bad consumption habits." Some experts believe the problem lies in the fact that the country's economic difficulties do not allow the government to import all its needs. According to energy affairs expert Amr Hammouda, the government can barely provide the foreign currency needed to purchase ordinary quantities of gasoline and butane gas. "The suppliers request that the government pays in cash before the ships unload the cargo," Hammouda said. He added that crises occur when the government delays payment, because there is no strategic stock of gasoline. However, Arafat also said that there have never been any importing difficulties because the EGPC -- which is responsible for making import deals -- always pays in cash. As with basic foodstuffs, the government considers petroleum products a priority, he said. "Besides," he added, "suppliers trust EGPC." Still, Arafat added, Egypt does not have gasoline or butane gas strategic stocks. "Egypt supplies the local market according to a plan that estimates its needs," he explained, adding that imports are delivered on a daily basis. "In order to have a strategic stock, we need at least $150 million in monthly funds. It is not going to be possible amid the current economic instability." Speaking on condition of anonymity, a Mobil petrol station manager in the Cairo district of Haram told Al-Ahram Weekly that petrol stations across the country now receive one third less gasoline than usual. He added that some stations receive even less than that. But there is another factor that contributes to the current difficulties in the market, according to Hammouda. "For the past 10 years the EGPC has been relying on one oil refinery for most of its supplies. The refinery started working at half capacity starting last August, causing a sudden gap in production," he said. The EGPC, he added, had to fill the gap through imports at high international prices that reached over $120 per barrel. The economic difficulties Egypt is going through since last year's revolution have led to several downgrades to its credit rating. The last credit downgrade was made by Standard and Poor's in early February, in response to persistent political instability and new foreign reserve losses. A negative outlook on the country's economy was maintained, meaning that new cuts to Egypt's credit rating remain possible. "Downgrading credit ratings means less foreign investments because of the high risk involved, higher loan costs with stiffer conditions, difficulties to raise funds from the bonds market and more difficulties facing both government and private sector imports," Eman Mohamed, professor of economics at Ain Shams University, told the Weekly. However, Mohamed added, the current sovereign credit rating does not affect Egypt's ability to borrow from international financial organisations. That is because it is still far from the so- called junk status that prevents the government from receiving loans from organisations such as the International Monetary Fund or the World Bank. Noamani Nasr Noamani, deputy chief of the General Authority for Supply Commodities (GASC), disagrees with Mohamed that credit rating cuts could affect the Egyptian government's imports of goods, including basic foodstuffs. "The government gives priority to importing strategic foodstuffs, like wheat, and providing any needed guarantees," he said, adding that the government always pays the supplier in cash. "Once a deal is finalised to import basic foodstuffs, the Central Bank of Egypt [CBE] immediately transfers its value to the supplier." Noamani also mentioned that Egypt currently has strategic stocks of basic foodstuffs, especially supply commodities. Stocks of wheat can cover the country's needs for four months, cooking oil and sugar can cover another three months, and the strategic stock of rice can secure two months, he told the Weekly. While, Noamani says, the government is not affected by the credit downgrade, the same cannot be said about the private sector. "Credit rating downgrades directly affect importers across Egypt," said Ahmed Sheiha, head of the importers division at the Cairo Chamber of Commerce. Sheiha explained that most of the international companies and banks now demand that Egyptian importers pay in cash, something that not all can afford to do. Some bigger and better-known Egyptian importers are sometimes exempted from the cash payment requirement, because they enjoy a stable financial situation and long-time trust with the supplier. However, they also face stiffer, more costly and time-consuming bank procedures, he added. "Transferring money to suppliers now takes more time, which makes them worry and jeopardises future deals," Sheiha said. "This is because the CBE follows some procedures to ensure the safety of the funds transfer process, while ensuring there are no suspicious smuggling attempts. But this is time consuming. Some importers have lost their long-time suppliers because of that." Sheiha believes that the economic situation will improve once security and stability are restored, and that international financial support will be of great benefit to that process. The Egyptian government and the International Islamic Institute of the Saudi-based Islamic Development Bank signed an agreement last week by which Egypt is due to receive a $1.2 billion loan to be directed to importing the country's needs of wheat and petroleum products.
