Libya Pays Risk Premium on Food Imports

Credit fears are causing Libya to have to pay extra for food imports, according to a report from Reuters.

Companies contacted by the news agency could not cite concrete cases of default by Libyan importers, but rather unease that payment could be delayed, not least by cumbersome bureaucracy.

Libya is a big importer of food, and Tripoli shops are now full of foreign produce. But one European grain trader commented:

There is an unspoken Libya premium in the grain trade which the country has to pay for grain imports despite the fact that its huge oil wealth should make it a grade one customer to sell to … Traders need the extra money because of payment risks and the general uncertainty in the pretty chaotic government there.

In a recent tender, Libya paid $395 per tonne on a cost and freight (c&f) basis for 30,000 tonnes of soft wheat, while the same day, Jordan paid only $378 a tonne c&f for 50,000 tonnes of higher quality wheat including more expensive shipment costs.

Officials denied there were any problems for foreign companies in securing payment, but some recognised an issue with perceptions of Libya after the widely publicised conflict.

Matahan Benghazi Chairman Suleiman al-Deeb, who took over after the war, said:

Banks guarantee our transactions; when (goods) arrive with the required specifications, the bank will pay the financial value immediately as provided in the issued contracts.

But two separate trade sources said they were aware of some white sugar cargoes being diverted to other destinations in recent weeks due to concerns over getting paid on time in Libya.

For a trader who is already busy, you think they have time to deal with this? For some it’s just getting too complicated,” another trading source said.

(Source: Reuters)

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